Q3 2024 Pure Cycle Corp Earnings Call
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Operator: Greetings.
Operator: Greetings. Welcome to the Pure Cycle Corporation. 2024. At this time, all participants are in a, A question and answer session will follow the, If anyone should require operation..., press zero on your telephone.
Operator: Welcome to the Pure Cycle Corporation Q3, 2024 earnings call. At this time, all participants are in a listen-only mode.
Speaker Change: Greetings. Welcome to the Pure Cycle Corporation Q3 2024 earnings call.
Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded.
Speaker Change: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Operator: Please note this conference is being recorded. Thank you. I will now turn the conference over to your host, president, and CEO. You may, Thank you, Holly.
Mark Harding: I will now turn a conference over to your host, Mark Harding, president and CEO.
Speaker Change: Please note this conference is being recorded. I will now turn the conference over to your host, Mark Harding, President and CEO . You may begin.
Mark Harding: You may begin. Thank you, Holly. And I'd like to welcome you all to our Q3 for 2024 period ending May 31. For those of you that are listening online, we also have a deck for this presentation. If you want to go to our website at purecyclewater.com, there'll be a banner on the landing page. You can click on that, and you can kind of follow through with the slide deck on that. We will also post a presentation on our website for you to be able to take a look and chill down a little bit deeper as you desire.
Mark W. Harding: And I'd like to welcome you all to our Q3 for 2024 period ending May 31st. For those of you that are listening online, we also have a deck for this presentation. If you want to go to our website at PureCycleWater.com, there will be a banner on the landing page. You can click on that, and you can kind of follow through with the slide deck on that.
Mark W. Harding: Thank you, Holly, and I'd like to welcome you all to our Q3 for 2024 period ending May 31st.
Mark W. Harding: For those of you that are listening online, we also have a deck for this presentation if you want to go to our website at purecyclewater.com. There'll be a banner on the landing page. You can click on that and you can kind of follow through with the slide deck on that.
Mark W. Harding: We will also post the presentation on our website for you to be able to take a look at and drill down a little bit deeper as you desire. So, I will note the transition between slides as we move through the presentation. Our first or second slide is actually our forward-looking statements, which I think you all are familiar with, statements that are not historical facts and contained or incorporated by reference in this presentation are forward-looking statements as defined by the Securities and Exchange Act.
Mark W. Harding: We will also post a presentation on our website for you to be able to take a look and drill down a little bit deeper as you desire.
Mark Harding: So, all will note the transition of the slides as we move through the presentation.
Mark W. Harding: So, I will note the transition of the slides as we move through the presentation. Our first or second slide, actually, is our forward-looking statements, which I think you all are familiar with, statements that are not.
Mark Harding: Our first or second slide actually is our forward-looking statements, which I think you all are familiar with. Statements that are not historical facts and contained or incorporated by referencing this presentation are forward-looking statements as defined by the Securities Exchange Act.
Mark W. Harding: Historical facts contained or incorporated by reference in this presentation are forward-looking statements as defined by the Securities and Exchange Act.
Mark W. Harding: What I'd like to do, with regard to the presentation, is briefly go through a bit of our strategies, really spend some time on our performance and the results of our Q3, talk a little bit about our assets and some of their trajectories and the strength and asset potential left in those, and then give you a brief update on some of those. So we'll move to slide four.
Mark Harding: What I'd like to do in regard to the presentation, I'll briefly go through quickly a bit of our strategies. Really spend some time on our performance and the results of our Q3. Talk a little bit about our assets and some of their trajectories and the strength and asset potential left in those, and then give you a brief update on some of those. So, we'll move to slide four. Very proud of our strong leadership and board. We have a very heavy board that provides a tremendous amount of guidance and then, together with our managers. With me here is Mark Speedale, who's our CFO, and you got a picture of our leadership team.
Mark W. Harding: What I'd like to do in regard to the presentation, I'll briefly go through quickly a bit of our strategies
Mark W. Harding: really spent some time on our performance and the results of our Q3, talk a little bit about our assets and some of their trajectories and the strength and the asset potential left in those.
Mark W. Harding: and then give you a brief update on some of those, so we'll move to slide four.
Mark W. Harding: I am very proud of our strong leadership and board. We have a very heavy board that provides a tremendous amount of guidance. And then, together with our managers, with me here is Marc Spezialy, who's our CFO, and I have a picture of our leadership team. You know, they've been with our team and our group for quite some time, all strong leaders within their individual industries, and bring a tremendous amount of experience, wealth, and knowledge to the company.
Mark W. Harding: Very proud of our strong leadership and board. We have a very heavy board that provides a tremendous amount of guidance. And then together with our managers, with me here is Marc Spezialy.
Mark W. Harding: who's our CFO , and...
Marc Stephen Spezialy: You've got a picture of our leadership team, you know, they've been with our team and our group for quite some time, all strong leaders within their individual industries and bring a tremendous amount of experience and wealth and knowledge to the company.
Mark Harding: They've been with our team and our group for quite some time. All strong leaders within their individual industries and bring a tremendous amount of experience and of wealth and knowledge to the company.
Mark W. Harding: We operate in three primary business segments. Our water segment, where we have a strong portfolio of water rights in a water-short area, and those water rights are very valuable, not only in terms of how we monetize those water rights, but also in how they position themselves in working with land development interests, which is our second segment, where we are a master plan developer in the Denver metropolitan area. We build master plan communities. We have one active master plan community, a fairly large master plan community, which will have about 3,200 residential units and over 2 million square feet of commercial space.
Mark Harding: We operate in three primary business segments. Our water segment where we have a strong portfolio of water rights in a water short area and those water rights are very valuable, not only in and of how we monetize those water rights, but also in how they position themselves in working with land development interests, which is our second segment where we are a master plan developer in the Denver metropolitan area. We build master plan communities. We have one active master plan community, fairly large, master plan community, which will have about 3,200 residential units and over 2 million square feet of commercial space.
Marc Stephen Spezialy: We operate in three primary business segments. Our water segment, where we have a strong portfolio of water rights in a water short area, and those water rights are
Marc Stephen Spezialy: very valuable, not only in and of how we monetize those water rights, but also in how they position themselves in
Marc Stephen Spezialy: Working with Land Development Interests, which is our second segment where we...
Marc Stephen Spezialy: are a master plan developer in the Denver metropolitan area. We build master plan communities. We have one active master plan community. It's a fairly large master plan community, which will have about 3,200 residential units and over 2 million square feet of commercial space.
Mark W. Harding: And then, as we're also developing our single-family lots for sale to our home builders, we keep some of those lots, and we work with our home builders to be able to have them build homes on them for our own portfolio. And what we like to do is keep that portfolio for those recurring revenue streams and be able to bring in additional income and also additional value from the appreciation of those assets as we continue to build value in the community.
Mark Harding: And then, as we're also developing our single-family lots for sale to our home builders, we keep some of those lots and we work with our home builders to be able to have them build homes on those for our own portfolio. And what we like to do is keep that portfolio for those recurring revenue streams and be able to bring in additional income and also additional value from the appreciation of those assets as we continue to build value in the community. It continues to add value to each of those homes. So at the very emerging and very successful segment for us as well.
Marc Stephen Spezialy: And then as we're also developing our single-family lots for sale to our homebuilders, we keep some of those lots and we work with our homebuilders.
Marc Stephen Spezialy: to be able to...
Marc Stephen Spezialy: have them build homes on those for our own portfolio.
Marc Stephen Spezialy: and what we like to do is keep that portfolio for those recurring revenue streams and be able to
Marc Stephen Spezialy: bring in additional income and also additional value from the appreciation of those assets as we continue to build value in the community. It continues to add value to each of those homes. So that's a very emerging and very successful segment for us as well.
Mark W. Harding: It continues to add value to each of those homes, so that's a very emerging and very successful segment for us as well. If you move to page seven, here's how each segment is positioned on the balance sheet.
Mark Harding: If you move to page 7, here's how each segment's positioned on the balance sheet. We have excellent liquidity, as most of you know. We have in excess of $24 million of cash. And then a very strong liquidity value with our note receivable, which is a receivable that we get as we continue to build out our infrastructure, our horizontal infrastructure, and our land development segments. So we have a little over 33 and a half million dollars of note receivable that continues to work hard for us, earning interest on that note receivable. And that gets we pay periodically through bond offerings that the municipality does as they continue to build their assessed value.
Marc Stephen Spezialy: If you move to page 7, here's how each segment's positioned on the balance sheet. We have excellent liquidity, as most of you know. We have in excess of $24 million of cash. And then a very strong liquidity value with our note receivable, which is a...
Mark W. Harding: We have excellent liquidity, as most of you know. We have in excess of $24 million of cash. And then a very strong liquidity value with our note receivable, which is a receivable that we get as we continue to build out our infrastructure, our horizontal infrastructure, and our land development segment. So we have a little over thirty-three and a half million dollars of note receivable that continues to work hard for us, earning interest on that note receivable.
Marc Stephen Spezialy: receivable that we get as we continue to build out our infrastructure, our horizontal infrastructure in our land development segment. So we have a little over thirty three and a half million dollars
Marc Stephen Spezialy: of note receivable that continues to work hard for us, earning interest on that note receivable. And that gets repaid periodically through bond offerings that the municipality does as they continue to build their assessed value.
Mark W. Harding: And that gets repaid periodically through bond offerings that the municipality does as they continue to build their assessed value. And then you see a little bit of collateral instruments from restricted cash, which is what we use for letters of credit that we use as security instruments as we work through our land development segment and how we partner with the local government.
Mark Harding: And then you see a little bit of collateral instruments from restricted cash, which is what we use for letters of credit that we use as security instruments as we work through our land development segment and how we partner with the local government jurisdictions. We also continue to grow the Sky Ranch Cab liquidity, and as that continues to grow, you should see one of those, another one of those bond offerings later this year, and we'll talk a little bit more about that later in the presentation.
Marc Stephen Spezialy: And then you see a little bit of collateral instruments from Restricted Cast, which is what we use for letters of credit that we use as security instruments as we work through our
Marc Stephen Spezialy: land development segment, and how we partner with the local government jurisdictions.
Mark W. Harding: We also continue to grow the Sky Ranch Cab liquidity, and as that continues to grow, you should see another one of those bond offerings later this year, and we'll talk a little bit more about that later in the presentation. Moving on to slide 8, we talk a little bit about our financial performance, how we do the performance metrics, and, you know, what our takeaways are from that. So, moving to slide 9, we continue to see significant growth this year with overall revenues up approximately 45 percent over the same period last year.
Marc Stephen Spezialy: We also continue to grow.
Marc Stephen Spezialy: the Sky Ranch Cab liquidity, and as that continues to grow, you should see another one of those bond offerings later this year, and we'll talk a little bit more about that later in the presentation.
Mark Harding: Moving on to slide 8, talk a little bit about our financial performance, how we do the performance metrics, and you know what our takeaways are from that. So moving to slide 9, we continue to see significant growth this year through overall revenues up approximately 45% over the same period last year. Taking a look at our gross profit, up over 60% from the same period last year. So this year really is demonstrating the continued value that we have within the assets and also really the performance that the company has with these highly appreciated assets. Taking a look at the P&L statement, corresponding increases in net income and earnings per share are up over 30% from that same period last year as well.
Marc Stephen Spezialy: Moving on to slide 8, talk a little bit about our financial performance.
Marc Stephen Spezialy: how we do the performance metrics and what our takeaways are from that. So moving to slide nine.
Marc Stephen Spezialy: We continue to see significant growth this year through overall revenues up approximately 45% over the same period last year.
Mark W. Harding: Taking a look at our gross profit, it is up over 60 percent from the same period last year. So, this year really is demonstrating the continued value that we have within the assets and also the performance that the company has with these highly appreciated assets. Taking a look at the P&L statement, corresponding increases in net income and earnings per share are up over 30% from that same period last year as well.
Marc Stephen Spezialy: taking a look at our gross profit up over 60% from the same period of last year. So, this year really is demonstrating the
Marc Stephen Spezialy: continued value that we have within the assets and also really the performance that the company has with these highly appreciated assets.
Mark W. Harding: So we continue to really have a great asset trajectory, not only for value but also for performance quarter over quarter and then year over year. Moving to slide 11, I want to break down our performance by segment.
Marc Stephen Spezialy: Taking a look at the P&L statement, corresponding increases in net income.
Mark Harding: So we continue to really have a great asset trajectory, not only for value but also performance quarter over quarter and then year over year.
Marc Stephen Spezialy: and Earnings Per Share are up over 30% from that same period last year as well. So we continue to really have a great asset trajectory, not only for value, but also performance quarter over quarter and then year over year.
Mark Harding: Moving to slide 11, I want to break down our performance by segment. We continue to realize attractive margins from each of these segments, which are reflected. Of the appreciation of these assets in each business segment, and you know really taking a look at how this is divided up between our water segment where we're delivering. Domestic water as well as industrial water for oil and gas, our land development segment continuing to add. With it either the company monetizing our sky ranch assets and then also our single family rental, so continue to have great performance in each of those segments.
Marc Stephen Spezialy: Moving to slide 11, I want to break down our performance by segment. We continue to realize attractive margins from each of these segments which are reflected.
Mark W. Harding: We continue to realize attractive margins from each of these segments, which is reflected in the appreciation of these assets in each business segment. And, you know, really taking a look at how this is divided up between our water segment, where we're delivering domestic water as well as industrial water for oil and gas. Our land development segment, continuing to add liquidity to the company, monetizing our Sky Ranch assets, and then also our single family rental, so we continue to have great performance in each of those segments.
Marc Stephen Spezialy: of the appreciation of these assets in each business segment and, you know, really taking a look at how this is divided up between our water segment where we're delivering domestic water as well as industrial water for oil and gas, our land development segment, continuing to add
Marc Stephen Spezialy: liquidity to the company, monetizing our Sky Ranch assets, and then also our single-family rental. So, continued to have great performance in each of those segments.
Mark W. Harding: Moving to slide 12, really drill down a little bit on our water and wastewater segment. 2024 has had significant strength in water sales, continued growth, and adding new customers each year. And then, you know, we've had a record year in water deliveries for oil and gas.
Mark Harding: Moving to slide 12, really drill down a little bit in our water and wastewater segment. 2024 has had significant strength in water sales, continuing growth, adding new customers each year. And then you know we've had a record year in water deliveries in oil and gas. We see this translating into, you know, demand from each of our home builders such that it gives us the confidence to start multiple phases. And so that's why you've seen us accelerate our phasing in the Sky Ranch development.
Marc Stephen Spezialy: Moving to slide 12, really drill down a little bit in our water and wastewater segment. 2024 has had significant strength in water sales, continued growth adding new customers each year, and then you know we've had a record year in water deliveries in oil and gas.
Mark W. Harding: Moving to the next slide, really taking a look at that industrial segment. We've got record deliveries, you know, we've sold a tremendous amount of water through the first three quarters and are really looking to finish the year out strong. So we've continued to invest in our water system, making sure that we have that capacity that's available for our oil and gas customers. Colorado is a very aggressive state in the regulatory climate.
Speaker Change: Moving to the next slide.
Speaker Change: Really taking a look at that industrial segment. We've got record deliveries, you know, we've sold tremendous amount of water through the first three quarters and really looking to finish the year out strong. So
Speaker Change: We've continued to invest in our water system, making sure that we have that capacity that's available for our oil and gas customers. Colorado is a very aggressive state on the regulatory climate, and so we've had a lot of...
Mark W. Harding: And so we've had a lot of investment that the oil and gas operators have had to make to solidify how they do business in the state of Colorado, and I think that they've got a comfort level with how that is being done. We're probably one of the strictest markets in the nation on environmental controls over oil and gas.
Speaker Change: A lot of investment that the oil and gas operators have had to make.
Speaker Change: to solidify how they do business in the state of Colorado and I think that they've got a
Speaker Change: comfort level for how that is being done. We're probably one of the
Speaker Change: Strictest markets in the nation on environmental controls over oil and gas and just to continue to strengthen the oil price continues to allow them to operate and perform.
Mark W. Harding: And just to continue to strengthen the oil price continues to allow them to operate and perform in our market segment. We have a very attractive, very oil-rich formation that happens to be right above where our water resources are. So there is a great partnership with us and our oil and gas operators. Moving on, I want to talk a little bit about the land development segment. Land development continues to see strong results with 40 percent growth year over year.
Speaker Change: in our market segment. We have a very attractive, very oil-rich formation that happens to be right above where our water resources are, so there's a great partnership with us and our oil and gas operators.
Speaker Change: Moving on, I want to talk a little bit about the land development segment. Land development continues to see strong results with 40% growth year-over-year periods.
Mark W. Harding: Key takeaway here is we are finishing up. We really have two, almost three phases that are currently active within the Sky Ranch development. We're finishing up the first sub phase of our second phase. We really need to get a better naming nomenclature for how we're identifying these, but our second phase was about 870 units.
Speaker Change: Key takeaway here is we are finishing up, really have two, almost three phases that are currently active within the Sky Ranch development. We're finishing up the first sub-phase of our second phase.
Speaker Change: We've really got to get a better naming nomenclature for how we're identifying these, but our second phase was about 870 units. We are closing out the first component of that, which was about 220 lots.
Mark W. Harding: We are closing out the first component of that, which was about 220 lots. We just have a few landscaping items to punch out, and most of the builders are completing their inventory of that. There are just a few lots that are under construction.
Speaker Change: We just have a few landscaping items to punch out and most of the builders are completing
Speaker Change: their inventory of that. There's just a few lots that are under construction.
Speaker Change: We've finished lots on Phase 2B, and they're all in the process of getting their building permits for Phase 2B, so we have active...
Mark W. Harding: We finished lots on Phase 2B, and they're all in the process of getting their building permits for Phase 2B, so we have active activity in making sure that that's available for them. All the water, sewer, roads, curbs, and gutters are complete, so they're actively working on getting their building permits and will be in the ground this summer making sure they have foundations and really selling out of some of their model homes from 2A. And then we also started 2C.
Speaker Change: activity on, you know...
Speaker Change: making sure that
Speaker Change: That's available for them. All the water, sewer, roads, curbs, and gutters are complete, so they're actively working on getting their building permits and will be in the ground this summer on making sure they have foundations and really
Mark W. Harding: So our third sub phase of that, where we have completed the dirt work, we've done all the grading on that, and we have our utility contractor out there right now working on the wet utilities, which are going to be the water and sewer. We hope to have those completed before the end of the year and then try and get a portion of the road work in there so that some of those builders can have some of those lots opened up by the end of the year and certainly by next spring, when the selling season begins.
Speaker Change: selling out of some of their model homes from 2A.
Speaker Change: And then we also started 2C, so our third sub-phase of that, where we have completed the dirt work, we've done all the grading on that, and we have our
Speaker Change: utility contractor out there right now working on the wet utilities, which are going to be the water and sewer. We hope to have those completed before the end of the year and then try and get a portion of the roadwork in there so that some of those builders can have some of those lots opened up by the end of the year and certainly by next spring into the selling season. So what you see is
Mark W. Harding: So what you see is we're really looking at, instead of having a couple hundred lots in production, we're really looking at closer to 400 lots in production. And then the fourth component of that, 2D, which is another 180 lots, but it's 184 sale lots.
Speaker Change: We're really looking at, instead of having a couple hundred lots in production, we're really looking at closer to 400 lots in production. And then the...
Mark W. Harding: We have a very large component of each of these subphases that we're holding back for our single-family rental portfolio. So each of these phases really translates to about 220 lots. And we're looking to get phase 2D of the dirt work started by the end of the year. And that's one of those seasonal issues where it's very easy for them to be able to move that dirt during the winter months.
Speaker Change: The fourth component of that, 2D, which is, you know, another 180 lots, but we have a very, it's 184 sale lots. We have a very large component of each of these sub-phases that we're holding back.
Speaker Change: for our single-family rental portfolio. So each of these phases really translate to about 220 lots.
Speaker Change: and we're looking to get phase 2D dirt work started by the end of the year and that's one of those seasonal issues where it's very it's very easy for them to be able to move that dirt during the winter months.
Mark W. Harding: So we're going to try and capitalize on that as well. So really, what you're seeing is an acceleration of the housing activities here in the Denver market. Just to give you a visual of that, if you take a look at the next slide, there's no substitute for seeing it. This gives you kind of an aerial view of it, taking a look at Phase 2A, which you can see is complete.
Speaker Change: So we're going to try and capitalize on that as well. So really, what you're seeing is an acceleration of the housing activities here in the Denver market.
Speaker Change: Just to give you a visual of that, if you take a look at the next slide, there's no substitute for seeing it. This gives you kind of a...
Speaker Change: an aerial imagery of it, taking a look at phase 2a, which you can see is complete.
Mark W. Harding: Phase 2B, which you can see is complete and ready for foundations and building permits. In Phase 2C, you can see that the dirt work is complete. And then, really, where we're going to expand into is 2D. So, tremendous growth there. I will attribute that mostly to our segments. We're in what we call the entry-level segment for the Denver market, delivering those lots. The homebuilders are still able to be very competitive in delivering lots that are less than a half a million dollars in this market.
Speaker Change: Phase 2B, which you can see is complete and ready for foundations and building permits. Phase 2C, you can see that dirt work being complete.
Speaker Change: and then really where we're going to expand into is 2D. So, tremendous growth in there. I will attribute that.
Speaker Change: mostly to our segments.
Speaker Change: We're in what we call the entry-level segment for the Denver market.
Speaker Change: delivering those lots, the homebuilders are still able to...
Speaker Change: Be very competitive on delivering lots that are less than a half a million dollars in this market. And I think that the interest rate has stabilized.
Mark W. Harding: And I think that the interest rate has stabilized in the market segment such that buyers are not really looking to time an interest rate purchase, but they really are looking for a need for housing and then really want to be in that affordable market segment. Continuing on, let's take a look at single-family rentals.
Speaker Change: in the market segment, such that buyers are not really looking to time an interest rate purchase, but they really are looking for a need for housing and then really want to be in that affordable market segment.
Mark W. Harding: We continue to add to our portfolio of rental units, which really are generating positive cash flow for us and also asset appreciation just because of the continued work that we're doing in the community. We're seeing 5, 6% continued asset appreciation of the overall home values out there. So, really good, strong growth here. You're going to see a lot of that continue to accelerate. We've got 14 units already.
Speaker Change: Continuing on, take a look at the single-family rentals. We continue to add to our portfolio rental units.
Speaker Change: which really are generating positive cash flow for us and also asset appreciation. Just because of the continued work that we're doing in the community, we're seeing 5-6 percent continued asset appreciation of the overall home values out there.
Speaker Change: Really good strong growth here. You're going to see a lot of that continue to accelerate. We've got 14 units already. We've got
Mark W. Harding: We've got, if you take a look at the next slide, we've got another 17 units coming online with 2B. And we've got builders that are really drilling down with the model home or the style of home. We're looking for each of our builders to help build that. We've got a diversity of product classes where we own some detached single-family lots, some attached duplex lots, as well as some attached townhome lots.
Speaker Change: If you take a look at the next slide, we've got another 17 units coming online with 2B and we've got builders that are really drilling down with the model home or the
Speaker Change: Style of home we're looking for each of our builders to help build that we've got a diversity of the product classes where we own
Speaker Change: some detached single-family lots, some attached duplex lots, as well as some attached townhome lots. And that will give us an opportunity where we can have multiple price points, we have multiple appreciation of asset values in there.
Mark W. Harding: And that will give us an opportunity where we can have multiple price points. We have multiple appreciation of asset values in there. And then, as you see, we're going to accelerate some of that in phases 2C and 2D, where we're adding an additional 40 homes in 2C and another 26 homes in 2D. So we're going to get really close to 100 homes in that portfolio within the next two years, and we're very excited about the continued performance and growth of that business segment.
Speaker Change: And then, as you see, we're going to accelerate some of that in phases 2C and 2D, where we're adding...
Speaker Change: an additional 40 homes in 2C and another 26 homes in 2D. So we're going to get really close to 100 homes in that portfolio within the next two years. And so we're very excited about the continued performance and growth of that business segment.
Mark W. Harding: This is, again, drilling down a little bit more, showing how that translates both in terms of the P&L on the income statement as well as asset growth from how the appreciation of the home values in our community continues to add value to the company. And so, a very good segment for us and really starting to become meaningful in terms of the company's P&L. Moving on, I'll talk a little bit about portfolio utilization.
Speaker Change: This is again drilling down a little bit more and illustrate how that translates both in terms of the P&L on the income statement as well as that asset growth.
Speaker Change: from how the appreciation of the home values in our community continue to add value to the company. And so, very good segment for us and really starting to become meaningful in terms of the company's P&O.
Mark W. Harding: We talked a little bit, and you've heard me from time to time refer to the fact that we've got very highly appreciated assets on the balance sheet, whether that's in terms of our water portfolio or our land portfolio and what the company has invested in to continue to increase that value. Wanted to provide a little bit of color on each of those, so let's drill down.
Speaker Change: Moving on, take a little bit about the portfolio utilization. We talk a little bit, and you've heard me from time to time refer to the fact that we've got
Speaker Change: very highly appreciated assets on the balance sheet, whether that's in terms of our water portfolio or our land portfolio and what the company has invested into to continue to increase that value.
Mark W. Harding: Let me outline a little bit as we work into that about what we see in the Denver real estate market. There is a lot of press about how housing is doing nationally as well as how housing is doing here in Denver locally, and not all segments of the housing market are performing equally. What we continue to see are supply shortages at the entry level. It really doesn't matter what market you're in.
Speaker Change: Wanted to provide a little bit of color on each of those so we can drill down
Speaker Change: You know, let me outline a little bit about the, as we...
Speaker Change: work into that about what we see.
Speaker Change: in the Denver real estate market.
Speaker Change: There's a lot of press about how housing is doing nationally, as well as how housing is doing here in Denver locally. And not all segments of the housing market are performing equally. What we continue to see are supply shortages at the entry level.
Mark W. Harding: You have affordability concerns, which are really pressuring most of your buyers to qualify for that entry-level segment. Whether they're going to be move-up buyers, whether they're going to be, you know, a second, not a second home, but the second purchase of a home, all of those are really competing for that entry-level product. And there's really just a supply shortage of that.
Speaker Change: It really almost doesn't matter what market you're in. You have affordability concerns, which are really pressuring most of your buyers.
Speaker Change: to qualify for that entry-level segment. Whether they're gonna be move-up buyers, whether they're gonna be a second, not a second home, but the second purchase of a home, all of those are really competing for that entry-level product.
Speaker Change: and there's really just a supply shortage of that. So what you have is an inventory imbalance about those projects, particularly here in Denver, that are capable of delivering lots for entry level. And we find ourselves positioned very nicely in that segment.
Mark W. Harding: So what you have is an inventory imbalance about those projects, particularly here in Denver, that are capable of delivering lots for entry-level housing. And we find ourselves positioned very nicely in that segment. We see this translating into, you know, demand from each of our home builders such that it gives us the confidence to start multiple phases, and so that's why you've seen us accelerate our phasing in the Sky Ranch development. Now, I want to talk a little bit about our water segment.
Speaker Change: We see this translating into demand from each of our home builders, such that it gives us the confidence to start multiple phases, and so that's why you've seen us accelerate our phasing in the Sky Ranch development.
Mark Harding: Talk a little bit about our water segment. We want to summarize some of our investments, which continue to monetize the water segment itself. You know, we talk about the overall service capacity here. We have the ability; our portfolio can provide 60 service to 60,000 connections. We currently have a water system that can serve about 3,600 connections. Our current connection tap bases, our domestic customers are right around 1,800. So we still have plenty of pedal left in our water system and our wastewater system.
Mark W. Harding: I want to summarize some of our investments which continue to monetize the water segment itself. We talk about the overall service capacity here. We have the ability, our portfolio can provide 60 services to 60,000 connections. We currently have a water system that can serve about 3,600 connections.
Speaker Change: Talk a little bit about our water segment. I want to summarize some of our investments which continue to monetize the water segment itself.
Speaker Change: You know, we talk about the overall service capacity here. We have the ability, our portfolio can provide 60.
Speaker Change: serviced the 60,000 connections.
Speaker Change: We currently have a water system that can serve about 3,600 connections, our current connection tap bases, our domestic customers are right around 1,800, so we still have plenty of pedal left in our water system and our wastewater system.
Mark W. Harding: Our current tap bases, our domestic customers are right around 1,800, so we still have plenty of pedal left in our water system and our wastewater system. A little bit about our land development. We have a total master plan zoning for 3,200 single-family units, a couple million square feet a square of commercial space, and that'll be a mix of retail. Still a little bit early on the commercial side.
Mark Harding: A little bit about our land development. We have total master plan zoning for 3,200 single-family units, a couple million square feet of square of commercial space, and that'll be a mix of retail. We're still a little bit early on the commercial. We continue to add to that customer base by our single family units out there and accelerating that demand. Certainly going to help accelerate the demand for the commercial aspects.
Speaker Change: A little bit about our land development. We have total master plan zoning for 3,200 single-family units, a couple million square feet a square of commercial space, and that'll be a mix of retail.
Mark W. Harding: We continue to add to that customer base with our single family units out there and accelerate that demand, certainly gonna help accelerate the demand for the commercial aspects. And then a little bit about where we're planning to go with the single family rental. If you look at the water system, a record year and well positioned to continue that growth, we're using about 50% of our capacity in what we've developed to deliver water to customers.
Speaker Change: We're still a little bit early on the commercial. We continue to add to that customer base by our single family units out there and accelerating that demand, certainly gonna help accelerate the demand for the commercial aspects. And then a little bit about where we're planning to go on the single family rentals.
Mark Harding: And then a little bit about where we're planning to go into single family rentals. If you look at the water system, you know, record year and well position to continue that growth. So we're using about 50% of our capacity in in what we've developed to deliver water to customers. And, and so what happens is we continue to invest in that for the only gas segment. And then as we continue to build the customers in the residential segment, we just have that capacity available and relocate that over to the residential side. So it's a terrific opportunity for us to get that system up and running, and it increases the margins that we're going to see as we add our new connections and our tapies on that.
Speaker Change: If you look at the water system, you know, record year and well-positioned to continue that growth. So we're using about 50% of our capacity in what we've developed to deliver water to customers.
Mark W. Harding: And so what happens is we continue to invest in that for the oil and gas segment. And then, as we continue to build customers in the residential segment, we have that capacity available and can reallocate that over to the residential side. So it's a terrific opportunity for us to get that system up and running.
Speaker Change: And so what happens is we continue to invest in that for the oil and gas segment.
Speaker Change: And then, as we continue to build the customers in the residential segment, we just...
Speaker Change: We have that capacity available and reallocate that over to the residential side, so it's a terrific opportunity for us to get that system up and running, and it increases the margins that we're going to see as we add our new connections and our TAPIs on that.
Mark W. Harding: And it increases the margins that we're going to see as we add our new connections and our TAPIs to that. So you're going to continue to see a very favorable development of our margins as we continue to add customers from our retail development. TAP fees, the overall portfolio, significant growth, adding new customers, multiple phases at Sky Ranch. And then you'll start to see, because we've got two phases going on at the same time, you're going to start to see a lot of those TAP fees accelerate into the P&L.
Mark Harding: So you're going to continue to see a very favorable development of our margins as we continue to add customers from our retail development. Capies the overall portfolio, significant growth adding new customers, multiple phases that's guy ranch. And then you'll start to see because we've got two two phases going on at the same time, you're going to start to see a lot of those tapies accelerate into. The PNL and those are really concurrent with building permits has our developer partners apply for building permits. They have to purchase those taps so that they can demonstrate to the local jurisdiction that they have sufficient.
Speaker Change: You're going to continue to see a very favorable development of our margins as we continue to add customers from our retail development.
Speaker Change: the overall portfolio, significant growth, adding new customers, multiple phases at Sky Ranch. And then you'll start to see, because we've got...
Speaker Change: Two phases going on at the same time, you're going to start to see a lot of those tap beads accelerate into
Mark W. Harding: And those are really concurrent with building permits. As our developer partners apply for building permits, they have to purchase those TAPs so that they can demonstrate to the local jurisdiction that they have sufficient, and they've secured all of their entitlements to be able to build that home.
Speaker Change: the P&L, and those are really concurrent with building permits, as are developer partners.
Speaker Change: apply for a building permit, they have to purchase those TAPs so that they can demonstrate to the local jurisdiction that they have sufficient, they've secured all of their entitlements to be able to build that home.
Mark Harding: They secured all of their entitlements to be able to build that home.
Mark Harding: Second a little bit about the land capacities, land inventory, and active development. We're about 18% complete in our overall residential portfolio. And then we have about that equal amount under construction, so whether that's under construction or we're zoned and we're phased into starting that, you're going to see that accelerates. So we're very excited about seeing that. Again, that commercial capacity we we translate that commercial capacity both in terms of the amount of loss that are available, which is not a direct correlation, but it gives us the ability to talk about how we would look to monetize that on.
Mark W. Harding: Thinking a little bit about land capacities, land inventory, and active development. We're about 18 percent complete in our overall residential portfolio. And then we have about that same amount under construction. So whether that's under construction or we're zoned and we're phased into starting that, you're going to see that accelerate. So we're very excited about seeing that again, that commercial capacity. When we translate that commercial capacity, both in terms of the amount of lots that are available, which is not a direct correlation, but it gives us the ability to talk about how we would look to monetize that on a valuation basis compared to our residential units, both in terms of water and land value. And that really translates into what that's going to look like for the overall project. And so when you take a look at how built we are, you know, we're only about 12% built.
Speaker Change: I'll talk a little bit about the land capacity, land inventory, and active development. We're about 18% complete in our overall residential portfolio.
Speaker Change: And then we have about that equal amount under construction, so whether that's under construction or we're zoned and we're phased into starting that, you're going to see
Speaker Change: That accelerates, so we're very excited about seeing that. Again, that commercial capacity, we translate that commercial capacity both in terms of the amount of lots that are available, which is not...
Speaker Change: correlation, but it gives us the ability to talk about how we would look to monetize
Mark Harding: A valuation basis compared to our residential units both in terms of water and the land value, and that really translates into what that's going to look like for the overall project. And so when you take a look at. How how built we are you know we're only about 12% built. We have a 15% of that pedal that's under under construction and under delivery. So we're really, you know, we have a lot of capacity left in there, and we're seeing tremendous demand for that, so we're going to jump into the market and continue to try to meet that.
Speaker Change: evaluation basis compared to our residential units, both in terms of water and the land value.
Speaker Change: and that really translates into what that's going to look like for the overall project.
Speaker Change: And so when you take a look at...
Mark W. Harding: We have about 15% of that pedal that's under construction and under delivery. So we're really, you know, we have a lot of capacity left in there, and we're seeing tremendous demand for that. So we're going to jump into the market and continue to try and meet that. On our single-family rental portfolio, as I mentioned, we've been much more aggressive about continuing to add to that portfolio and working with our home builders to be able to get some of those lots under construction with their models. And, you know, they are tapping the market. They're much more attuned to what the buyers are looking for out there, which is helpful for us because it fits on the lot.
Speaker Change: how built we are.
Speaker Change: You know, we're only about 12% built, we have about 15% of that pedal that's under construction and under delivery. So we're really, you know, we have a lot of capacity left in there, and we're seeing tremendous demand for that, so we're going to jump into the market and continue to try and meet that.
Mark Harding: On our single family rental portfolio, as I mentioned, we've been much more aggressive about continuing to add to that portfolio, and working with our home builders to be able to get some of those lots under construction with their models, and they are tapping the market. They're much more attenuated to what the buyers are looking for out there, which is helpful for us, because it fits on the lot. They've got a lot of things to do with what they've got to do with what they've got to do with what they've got to do with what they've got to do with what they've got to do with what they've got to do with what they've got to do with what they've got to do with what they've got to do with what they've got to do with what they've got to do with what they've got to do with what they've got to do with what they've got all of the demand characteristics in the market studies that show them what these buyers are looking for, and it translates directly into what these renters are going to be looking for, so that's a great relationship with them, and we'll continue to grow that portfolio to 200, and possibly even more than 200. It's a guy ranch, so that's kind of where our trajectory is looking for on the single family rentals.
Speaker Change: On our single-family rental portfolio, as I mentioned, you know, we've been much more aggressive about continuing to add to that portfolio and working with our homebuilders.
Speaker Change: to be able to get some of those lots.
Speaker Change: under construction with their models and...
Speaker Change: They are tapping the market. They're much more attenuated to what the buyers are looking for out there, which is helpful for us because it fits on the lot.
Mark W. Harding: They've got all of the demand characteristics and the market studies that show them what these buyers are looking for, and it translates directly into what these renters are going to be looking for. So that's a great relationship with them, and we'll continue to grow that portfolio to two hundred and possibly even more than two hundred units at Sky Ranch. So that's kind of where our trajectory is looking for the single family rental. I just want to emphasize the punchline here.
Speaker Change: They've got all of the demand characteristics in the market studies that show them what these buyers are looking for.
Speaker Change: It translates directly into what these...
Speaker Change: Renters are going to be looking for so that's a great relationship with them and we'll continue to grow that portfolio
Speaker Change: to 200 and possibly even more than 200 at Sky Ranch. So that's kind of where our trajectory is looking for on the single-family rentals.
Mark Harding: You know, just want to emphasize the punchline here: you know, the company is doing great with our margins, as well as continued cash flow. So you look at 62% gross margins or return on assets, and our asset growth are all continuing to do terrific performance.
Mark W. Harding: The company is doing great with our margins as well as continued cash flow. So you look at 62% gross margins, our return on assets, and our asset growth are all continuing to show terrific performance. But you know, if I take a look at anything, there just seems to be a disconnect.
Speaker Change: You know, just want to emphasize the punchline here, you know, the company is doing great with our margins as well as
Speaker Change: continued cash flow. So you look at 62% gross margins, our return on assets, and our asset growth are all continuing to do terrific performance.
Mark Harding: You know, if I take a look at anything, you know, there just seems to be a disconnect, and I know you all are equally as frustrated with the disconnect between our growth, our performance, our outlook, because our outlook looks continued. And it seems to be a disconnect with our share price, so that's a bit disappointing, and you know, continues to lead into what we're doing with our stock repurchase program. So we continue to be in the market; we continue to buy stock each week. You know, we have standing orders with our repurchase program. And that accelerated that with the weakening of the share price to continue to take advantage of that, and we'll continue to do so. So you see we've been, you know, in that 15 to 20,000 share quarter repurchases, we were a little bit more aggressive.
Speaker Change: You know, if I take a look at anything...
Mark W. Harding: And I know you all are equally as frustrated with the disconnect between our growth, our performance, and our outlook because our outlook looks fantastic. Terrific, just given where our asset appreciations have been and where we continue to invest. And it just seems to be a disconnect with our share price. So that's a bit disappointing.
Speaker Change: There just seems to be a disconnect, and I know you all are equally as frustrated with the disconnect between our growth, our performance, our outlook, because our outlook looks continued.
Speaker Change: terrific, just given where our asset appreciations have been and where
Mark W. Harding: And, you know, continues to lead into what we're doing with our stock repurchase program. So we continue to be in the market. We continue to buy stock each week.
Speaker Change: We continue to invest.
Speaker Change: and it just seems to be a disconnect with our share price, so that's a bit disappointing.
Speaker Change: you know, continues to lead into what we're doing with our stock repurchase program. So we continue to be in the market. We continue to buy stock each week. You know, we have standing orders with our repurchase program and have accelerated that with a weakening of the share price to continue to take advantage of that. And we'll continue to do so. So you see, we've been, you know, in that 15 to 20,000 share quarter repurchases, we were a little bit more aggressive in the first couple of weeks or
Mark W. Harding: You know, we have standing orders with our repurchase program and have accelerated that with the weakening of the share price to continue to take advantage of that. And we'll continue to do so. So you see, we've been, you know, in that 15 to 20,000 share quarterly repurchase program. We were a little bit more aggressive in the first couple of weeks or the first month of our fourth quarter here.
Mark Harding: And the first couple of weeks, or the first first month of our fourth quarter here, and we're going to continue to be in the market as that continues to demonstrate its weakness. But, you know, we're very optimistic that, you know, what we focus on is continuing to build value within our assets and continue to perform through each of our business segments.
Mark W. Harding: And we're going to continue to be in the market as that continues to demonstrate its weakness. But, you know, we're very optimistic that, you know, what we focus on is continuing to build value within our assets and continue to perform through each of our business segments. I do want to welcome our newest director. We had a retiring audit chair, board member Peter Howe, and we welcome Sue Heitman to the board.
Speaker Change: The first month of our fourth quarter here, and we're going to continue to be in the market as that continues to demonstrate its weakness, but we're very optimistic that
Speaker Change: What we focus on is continuing to build value within our assets and continue to perform through each of our business segments.
Mark Harding: As you want to welcome our newest director, we had a retiring audit chair of board member Peter Howell, and our welcome suit heightmen to the board. She has tremendous experience as a retired partner from KBMG, really hit the ground running, and is bringing tremendous value each and every time. She's a tremendous asset for the company, and we really look forward to her tenure ship on the board as well.
Speaker Change: Board Member Peter Howe, and our welcome Sue Heitman to the board. She has tremendous experience as a retired partner from KPMG.
Mark W. Harding: She has tremendous experience as a retired partner from KPMG, really hits the ground running, and is bringing tremendous value each and every time. She's a tremendous asset for the company, and we really look forward to her tenure on the board as well.
Speaker Change: really hit the ground running and is bringing tremendous value each and every time. She's a tremendous asset for the company and and we really look forward to her tenureship on the board as well.
Mark Harding: So with that, I guess I'll turn it back over to Holly, and if you guys have got some specific questions, I'd be more than happy to drill down and provide a little bit more color if there was something I'd cover too quickly, or something that I just didn't identify enough. So I'll turn it back over to you, Holly. Thank you.
Operator: And if you guys have got some specific questions, I'd be more than happy to drill down and provide a little bit more color if there was something I covered too quickly or something that I just didn't identify enough. So I'll turn it back over to you, Holly. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone.
Holly: So with that, I guess I'll turn it back over to Holly, and if you guys have got some specific questions, I'd be more than happy to drill down and provide a little bit more color.
Holly: If there was something I covered too quickly or something that I just didn't...
Holly: identify enough. So I'll turn it back over to you Holly.
Operator: At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.
Holly: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Operator: A confirmation tone will indicate your line is in the, You may press star 2 if you would like to remove your question from and the participants' equipment. It may be necessary to pick up your handset before pressing this dark button.
Holly: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: One moment, please, while we poll for questions. The first question for today is from John Rosenberg with Laughlin Water. Yeah, good morning, Mark, and thanks. Good morning.
Holly: One moment, please, while we poll for questions.
John Rosenberg: Your first question for today is from John Rosenberg with Lockwood Water Partners.
Speaker Change: Your first question for today is from John Rosenberg with Laughlin Water Partners.
John Rosenberg: Yeah, good morning, Mark, and thanks for taking my question. Good morning. I appreciate your presentation, and I also really appreciate actually the depth of detail that you go through about the company each time. And, of course, very nice quarter and good progress, and I share your frustrations about the share price. But a couple things.
John Rosenberg: Yeah, good morning, Mark, and thanks for taking my question.
John Rosenberg: I appreciate your presentation, and I also really appreciate, a very nice quarter and good progress; share your frustrations about the share price. A couple things, um... Could you go into a bit more detail or granularity about that, uh, the public... I don't know exactly how that works, and I suspect maybe that... That's a great question, and the simple answer is that when we build infrastructure that is owned by the government, in our particular case, there are multiple agencies that will own this infrastructure, whether it's the local drainage authority, whether it's the county, which will own the roads, or whether it's the parks and the open space that are owned by the local government agencies that manage Sky Each of those expenses is reimbursable.
John Rosenberg: I appreciate your presentation and I also really appreciate actually the depth of detail that you go through about the company each time.
Speaker Change: And, of course,
Speaker Change: Very nice quarter and good progress, and I share your frustrations about the share price.
Mark Harding: Could you go into a bit more detail or granularity about that the public improvement receivable and exactly how this works? I suspect maybe that payments might accelerate as you grow your tax base, but I'd like to hear a bit more about that if I could. That's a great question, and it's, you know, it has the simplistic answer is that when we build infrastructure that is owned by the government entity, in our particular case, there are multiple agencies that will own this infrastructure, whether it's the local drainage authority, whether it's the county, which will own the roads, or whether it's the parks and the open space that are owned by the local government agencies that manage Sky Ranch.
Speaker Change: A couple things, could you go into a bit more detail or granularity about the public improvement receivable and exactly how that works?
Speaker Change: I suspect maybe that payments might accelerate as you grow your tax base, but I'd like to hear a bit more about that.
Speaker Change: That's a great question and it's...
Speaker Change: You know it has the simplistic answer is that when we build
Speaker Change: infrastructure that is owned by the
Speaker Change: government entity. In our particular case, there are multiple agencies that will own this infrastructure, whether it's the local drainage authority,
Speaker Change: whether it's the county, which will own the roads, or whether it's the parks and the open space that are owned by the local government agencies that manage Sky Ranch.
Mark W. Harding: And so what that does is we make that investment. We have a third-party independent engineering firm assess that that does indeed qualify for reimbursement, and that allows us to book that note on our financial statement. So it's been verified by a third party that that qualifies for reimbursement.
Mark Harding: Each of those are reimbursable, and so what that does is we make that investment. We we have a third party independent engineering firm assess that that does indeed qualify for reimbursable that allows us to book that note on our financial statements so it's been verified by third party that that qualifies for reimbursements and how that gets paid back is as we build homes there those homes contribute to the assess value and so each home and I'll just make the number simple let's say each home out there is a half a million dollars and if we had a thousand homes out there that translates into five and math right five hundred million dollars of assess value and then the tax implications of that are you get assessed based on the mill levy rate and and this really dives that the the simple answer is that we get paid back the the complex answer is it's a formula that's based on the mills so that's what the property tax level is and and then that assess value qualifies for both annual revenues that come into the district and we take those annual revenues and we pledge them to a bond offering so that bond offering you know takes a certain number of those units and It monetizes that at a point in time, and then you build the next phase, and then you bond that phase, and so it's about a two year lag in that process.
Speaker Change: each of those are reimbursable. And so what that does is we make that investment.
Speaker Change: We have a third-party independent engineering firm
Speaker Change: does indeed qualify for reimbursable that allows us to book that note.
Speaker Change: on our financial statement. So it's been verified by a third party that that qualifies for reimbursement.
Mark W. Harding: And how that gets paid back is as we build homes there, those homes contribute to the assessed value. And so each home, and I'll just make the numbers simple, let's say each home out there is a half a million dollars. And if we had a thousand homes out there, that translates into five.
Speaker Change: And how that gets paid back is, as we build homes there, those homes contribute to the assessed value, and so each home, and I'll just make the numbers simple, let's say each home out there is a half a million dollars, and if we had a thousand homes out there,
Speaker Change: That translates into five...
Mark W. Harding: $100 million of assessed value. And then the tax implications of that are you get assessed based on the mill levy rate. And this really gets down to the simple answer is that we get paid back. The complex answer is it's a formula that's based on the mills.
Speaker Change: That's right.
Speaker Change: Five.
Speaker Change: $100 million of assessed value.
Speaker Change: And then the tax implications of that are, you get assessed based on the mill levy rate.
Speaker Change: And this really dives down. The simple answer is that we get paid back. The complex answer is it's a formula that's based on the mills. So that's what the property tax level is.
Mark W. Harding: So that's what the property tax level is, and then that assessed value qualifies for both annual revenues that come into the district. And we take those annual revenues, and we pledge them to a bond offering. So that bond offering, you know, takes a certain number of those units, and it's, it monetizes that at a point in time. And then you build the next phase, and then you bond the next phase, and then you build the next phase, and then you bond that phase. And so there is about a two-year lag in that process.
Speaker Change: and then that assessed value qualifies for both annual revenues that come into the district and we take those annual revenues and we pledge them to a bond offering. So that bond offering you know takes a certain number of those units and it
Speaker Change: It monetizes that at a point in time, and then you build the next phase, and then you bond the next phase, and then you build the next phase, and then you bond that phase, and so it's about a two-year lag in that process.
Mark W. Harding: And we will take a look at another one of those bond offerings later this year, which will really be a refinancing of the first 500 units that we have out there. And that's because we've run down our call premium on those. Those are typically five-year calls on those.
Mark Harding: We will take a look at another one of those bond offerings later this year, which will really be a refinancing of the first 500 units that we have out there, and that's because we've run down our call premium on those. Those are typically five-year calls on those, so we've got that running down. We did that bond offering in 2019, I think, 2018, 2019 timeframe, but as the market continues to appreciate, as these homes continue to grow in value, that a set of values applies to the same millevies, and it just has more capacity to repay those bonds.
Speaker Change: We will take a look at another one of those bond offerings later this year, which will really be a refinancing of the first $500.
Speaker Change: Mark Harding, Marc Spezialy
Mark W. Harding: So we've got that running down. We did that bond offering in 2019, I think, in the 2018, 2019 timeframe. But as the market continues to appreciate, as these homes continue to grow in value, that assessed value is applied to the same mill levies, and it just has more capacity to repay those bonds. And so we should see something in the $8 million range of refinancing of that bond offering on that one later this year.
Speaker Change: As the market continues to appreciate, as these homes continue to grow in value,
Speaker Change: That assessed value is applied to the same mill levies, and it just has more capacity to repay those bonds.
Mark Harding: We should see something in the $8 million range of refinancing of that bond offering on that one later this year. We roll that balance down, and then we continue to crew that out. One of the things that we look at, each period, is the overall recoverability of that note receivable. And so we have a third party that takes a look at that on an independent basis, so that our auditors are comfortable with the recoverability of that, and we have plenty of bond capacity. If you take a look at the overall from Sky Ranch, the overall bonding capacity of Sky Ranch is close to $400 million worth of bonding capacity at build out, and we project will have somewhere of an investment, and we want to crew it, but we have projected our total public improvements to be somewhere around $300 million.
Speaker Change: We should see something in the eight...
Speaker Change: $8 million range of refinancing of that bond offering on that one later this year. We roll that balance down and then we continue to accrue that out.
Mark W. Harding: We roll that balance down, and then we continue to accrue that out. One of the things that we look at each period is the overall recoverability of that note receivable. And so we have a third party that takes a look at that on an independent basis so that our auditors are comfortable with the recoverability of that. And we have plenty of bond capacity. If you take a look at the overall Sky Ranch, the overall bonding capacity of Sky Ranch is close to $400 million worth of bonding capacity at build-out.
Speaker Change: One of the things that we look at
Speaker Change: Each period is the overall recoverability of that note receivable, and so we have a third-party
Speaker Change: that takes a look at that on an independent basis so that our auditors are comfortable with the recoverability of that. And we have plenty of bond capacity, if you take a look at the overall...
Speaker Change: from Sky Ranch. The overall bonding capacity of Sky Ranch is close to $400 million worth of bonding capacity at build-out, and we project we'll have somewhere of an investment, and we won't accrue it, but we have
Mark W. Harding: And we project we'll have somewhere of an investment, and we won't accrue it, but we have projected our total public improvements to be somewhere around $300 million. So we'll have plenty of capacity to repay these on an incremental basis where we will continue to make those improvements, build that assessed value, and bond those out on each cycle. And commercial adds even more value to that. Colorado, as I've talked about in the past, is a sales tax incentive state, so we get four times the amount of revenue from commercial taxes as we do from residential taxes.
Speaker Change: projected our total public improvements to be somewhere around 300 million. So we'll have plenty of capacity to repay these on an incremental basis where we will continue to
Mark Harding: So we'll have plenty of capacity to repay these on an incremental basis where we will continue to, you know, more value in that Colorado, as I've talked about in the past, is a sales tax incentive state, so we get four times the amount of revenue from commercial taxes as we do residential taxes. So, as that gets going, you'll see a lower overall retain balance in the role forward on our public improvements because the commercial has much higher capacity to repay.
Speaker Change: make those improvements, build that assessed value, bond those out on each cycle. And commercial adds even more value in that. Colorado, as I've talked about in the past, is a sales tax incentive state, so we get four times.
Mark W. Harding: So as that gets going, you'll see a lower overall retained balance in the roll forward on our public improvements because the commercial sector has a much higher capacity to repay. Okay. Thank you for that. And that is very enlightening. What item?
Speaker Change: the amount of revenue from commercial taxes as we do residential taxes. So as that gets going, you'll see a lower overall retained balance in the roll forward on our public improvements because the commercial has much higher capacity to repay.
John Rosenberg: Okay, thank you for that, and that is very enlightening. Just quick housekeeping on that, though, what items would we see that in your statements? I can't identify any items in your income statement, nor cash flows where it looks like the payment back from the sales tax. It'll be in the note, receivable, and then the payments to the note, receivable. So we haven't had a revenue item of that in this last quarter, but I was mentioning it is lumpy. But that's exactly right. But in the nine-month cash flow statement, I'm not seeing, I guess it. There is some, there is some; you'll see, because we can take that offline sometime.
Speaker Change: Okay, I thank you for that, and that is very enlightening. Just a quick housekeeping on that, though. What items would we see that in in your statements? I can't identify any items in your income statement, nor cash flows, where it looks like the payment back from...
John Rosenberg: I can't identify any items in your income statement nor cash flow. It's like the payment back from the sales tax. It'll be in the note receivable, and then the payments to the note receivable. So we haven't had a revenue item of that. There was not.
Speaker Change: from the sales tax, or excuse me, from the assessed tax.
Speaker Change: It'll be in the note receivable and then the payments to the note receivable.
Speaker Change: I don't. OK.
Speaker Change: because we haven't had a revenue item of that in this last.
John Rosenberg: That's good. It is lumpy, that's exactly right. Yeah, but in the nine-month cash... There is some. There is some. You'll see because we... Okay, we can take that offline sometime. No, that's okay.
Speaker Change: It is lumpy, that's exactly right, but in the nine-month cash flow statement, I'm not seeing...
Speaker Change: I guess it.
Speaker Change: Bye!
Mark Harding: No, that's okay, and as in, as in. and you know a negative number but yeah and you know your question is very it's a great question because I get a lot of folks asking the same question and you will see even interimly between bond offerings the local municipality will pay us interest because they have access revenues and you know they're they're not I would say they're not insignificant you know sometimes they'll be hundreds of thousands of dollars and and then when we do a bond offering we'll get millions of dollars and so you'll see periodically that that runs through the PNL through when we book the note receivable but then you'll see the recovery of that note receivable just in the statement of cash flows.
Speaker Change: There is some. There is some. You'll see because we... We can take that offline sometime. No, that's okay.
Mark W. Harding: Yeah, and you know, your question is very, it's a great question because I get a lot of folks asking the same question. And you will see even interimly, between bond offerings, the local municipality will pay us interest because they have excess revenues. And, you know, they're not, they're not insignificant. I would say they're not insignificant. Sometimes there'll be hundreds of thousands of dollars, and, And then when we do a bond offering, we'll get millions of dollars.
Speaker Change: You know.
Speaker Change: A negative number, but...
Speaker Change: Yeah, and you know, your question is very, it's a great question because I get a lot of
Speaker Change: folks asking the same question, and you will see, even interimly, between bond offerings, the local municipality will pay us interest because they have excess revenues. And, you know, they're not...
Speaker Change: I would say they're not insignificant. Sometimes there'll be hundreds of thousands of dollars.
Mark W. Harding: And so you'll see periodically that this runs through the P&L when we book the note receivable. But then you'll see the recovery of that note receivable just in the statement of cash. Okay, I do see an item.
Speaker Change: And then when we do a bond offering, we'll get millions of dollars. And so you'll see periodically that that runs through the P&L through when we book the note receivable, but then you'll see the recovery of that note receivable just in the statement of cash flows.
John Rosenberg: I see. Okay, I do see an item payment on note receivable related party. Yeah, okay. So thank you very much, and just to keep it kind of refer, you know, other people, and what is the enrollment of Sky Ranch Academy right now? Good question. Right around 500 students, we had a limited offering of grades, so the middle school, which offers K through 8, we opened up K. Through 7 next year, we'll add the 8th grade; following year, we'll add the 9th grade, and so incrementally we add 1 grade of students per year.
John Rosenberg: Yep, yep. Okay, so thank you very much. What is the enrollment of Sky Ranch Academy? Good question.
Speaker Change: I see. Okay, I do see an item, payment on note, receivable related party. Yep. Yep. Okay, so thank you very much. And just to keep it kind of brief for, you know, other people and
John Rosenberg: It's right around 500 students, so we have a limited offering of grades. So the middle school, which offers K through eight, we opened up K through seven. Next year, we'll add the eighth grade.
Speaker Change: What is the enrollment of Sky Ranch Academy right now?
Speaker Change: Good question. It's right around 500 students. We had a limited offering of grades, so the middle school, which offers K through 8,
Speaker Change: We opened up K-7. Next year we'll add the 8th grade. The following year we'll add the 9th grade. And so incrementally we add one grade of students per year.
Mark Harding: Normally, sense okay. Well, thank you very much. I appreciate it. I would actually love to come to your event next week, but I can't, so good luck with that, and thank you. Good luck with everything else. Thanks a lot, and then, you know, just as you've highlighted that for all the other folks listening, we will have a Q&A session on there that will be a webcast. So if you can't make it out but want to listen in on some of the Q&A, sometimes that's helpful as well. So if you can't make it, also take a look at that, and I think we've got that scheduled at 1 o'clock, but we'll send another announcement out next week on that just to record.
Mark W. Harding: The following year, we'll add the ninth grade. And so, incrementally, we add one grade of students per year. Well, thank you very much. I appreciate it. I would actually love to come to your school. Good luck with that, and good luck with everything.
Speaker Change: It makes sense.
Speaker Change: Well, thank you very much. I appreciate it. I would actually love to come to your event next year.
Mark W. Harding: And then, you know, just as you've highlighted that for all the other folks listening, we will have a Q&A session on there that will be webcast. So if you can't make it out but want to listen in on some of the Q&A, sometimes that's helpful as well. So if you can't make it, also take a look at that.
Speaker Change: So good luck with that and good luck with everything else.
Speaker Change: And then, you know, just as you've highlighted that for all the other folks listening, we will have a Q&A session on there that will be webcast, so if you can't make it out...
Speaker Change: but want to listen in on some of the Q&A. Sometimes that's helpful as well so if you can't make it also take a look at that and I think we've got that scheduled at 1 o'clock but we'll send another announcement out next week on that just to remind folks.
Mark W. Harding: And I think we've got that scheduled at one o'clock, but we'll send another announcement out next week on that just to remind folks. Great. Very well.
John Rosenberg: Remind folks great. Very well, thanks a lot, Mark.
Tucker Anderson: Your next question is from Tucker Anderson with Above All Advisors. Good morning, Mark.
Speaker Change: Great, very well. Thanks a lot, Mark.
John Rosenberg: Thanks a lot, Mark. Your next question is from Tucker, above all else. Good morning.
Speaker Change: Your next question is from Tucker Anderson with Above All Advisors.
Geoffrey Scott: Good morning, Mark. Dr. Nice to hear from you. A lot different company than when I first met you, I guess. Yeah, I think you and I met, and I may have been flying solo.
Tucker Anderson: Doctor, nice to hear from you. A lot different company than what I first met you. I think I think you and I met, and I may have been flying solo. Now you've had a much more skeletal staff, but yes, we've grown quite a bit, and thank you for your continued role. I don't think land development was even even on your long range plan at that point, but anyway, yeah, and once again, as a previous caller, I apologize I can't get there. I'll try to get on the Q&A, but we'll actually be somewhere on the Great Lakes.
Tucker Anderson: Good morning, good morning, Mark. Doctor, nice to hear from you.
Mark W. Harding: A lot different company than when I first met you, I guess. Yeah, I think you and I met, and I may have been flying solo. No, we had a much more skeletal staff, but yes, we've grown quite a bit, and thank you for your continued loyalty.
Mark W. Harding: No, we had a much more skeletal staff, but yes, we've grown quite a bit, and thank you for your continued loyalty. I don't think land development was even on your long-range plan at that point, but anyway. And once again, as a previous caller, I apologize; I can't get there.
Mark W. Harding: I don't think land development was even on your long-range plan at that point.
Geoffrey Scott: I'll try to get on the Q&A, but we'll actually be somewhere on the Great Lakes at that point, visiting different ports. So it'll depend on where I am, whether I can join. Well, one of these times, we might have to try and do it in the winter so y'all can kind of parlay that into a ski weekend as well. Well, I think I told you I feel even worse about it because my daughter lives in Denver, and I won't be able to coordinate a visit for her.
Speaker Change: And once again, as a previous caller, I apologize, I can't get there. I'll try to get on the Q&A, but we'll actually be somewhere on the Great Lakes at that point, visiting different ports, so it'll depend on where I am, whether I can join you.
Tucker Anderson: At that point, visiting to different ports, so it'll depend on where I am whether I can join you toward the remote lake.
Tucker Anderson: One of these times we might have to try and do it in the winter so y'all can kind of parlay that into a ski ski weekend as well. Well, I think I told you I feel I feel even more about it because my daughter was in Denver, and I shouldn't be able to coordinate with a visit for her. But anyway, I once again want to thank you for the detail too. And the first thing I wanted to drill down on was that that. Segmenting of the phase two was very, very helpful. And as you go through that, what will be happening to the average price of your lot's sales?
Speaker Change: Well, one of these times we might have to try and do it in the winter so y'all can kind of parlay that into a ski weekend as well.
Mark W. Harding: But anyway, and I once again want to thank you for the detail too, and the first thing I wanted to drill down on was that segmenting phase two was very, very helpful. And as you go through that, what will be happening to the average price of your lot? because it seems to me we're sort of an irresistible force moving the country, meeting a, you know, a movable object in terms of prices continuing to escalate, but affordability to continue to decline.
Speaker Change: Well, I think I told you, I feel even worse about it because my daughter lives in Denver and I shouldn't be able to coordinate with a visit for her. But anyway, and I once again want to thank you for the detail, too. And the first thing I wanted to drill down on was that
Speaker Change: Segmenting of the Phase II was very, very helpful.
Speaker Change: And as you go through that, what will be happening to the average price of your lot sales? Because it seems to me we're sort of the irresistible force meeting a movable object in terms of
Mark Harding: Because it seems to me we're sort of the irresistible force moving to meeting the, you know, a movable object in terms of prices continuing to escalate but affordability to continue and decline. And do you think you can continue to get escalating prices as you go through the different phases and sell the lots? Yes, we do. And so what we're experiencing, you know, we have built-in inflators to each of the phases. I have my builder contract in there for phase two B and two C, as we broken ground on each of those, and we're pricing our phase two D specifically.
Speaker Change: prices continuing to escalate, but affordability to continue in decline. And do you think you can continue to get escalating prices as you go through the different phases and sell the lots?
Mark W. Harding: And do you think you can continue to get escalating prices as you go through the different phases and sell the lot? Yes, we do. And so what we're experiencing, you know, we have built in inflation into each of the phases.
Speaker Change: Yes, we do and so what we're experiencing, you know, we we we have built in inflators to
Geoffrey Scott: I have my builder contract in there for phases 2B and 2C, as we've broken ground on each of those, and we're pricing our phase 2D specifically. And so we want to make sure that we maintain margins, but we're also, you know, partnering with our home builders. And so we really do want to be competitive in the marketplace and make sure that we're offering, you know, value to the proposition for our shareholders but also give the home builders the opportunity to continue to compete, because we want a high absorption rate for those homes.
Speaker Change: each of the phases.
Speaker Change: I have my builder contracts in there for Phase 2B and 2C, as we've broken ground on each of those, and we're pricing.
Mark Harding: And so we want to make sure that we maintain margins. But we're also, you know, partnering with our home builders. And so, we really do want to be competitive in the marketplace and make sure that we're offering, you know, value to the proposition for our shareholders that also give the home builders the opportunity to continue to compete because we want a high absorption on those homes. We want their participation in this. And so there's that delicate balance of, you know, getting the right number to maintain our development margins, getting the right number. So our builders can maintain their margins and getting the right number.
Speaker Change: are Phase 2D specifically, and so we want to make sure that we maintain margins, but we're also, you know, partnering with our home builders, and so we really do want to be competitive in the marketplace and make sure that we're offering
Speaker Change: you know, value to the proposition for our shareholders, but also give the homebuilders the opportunity to continue to compete because we want a high absorption on those homes. We want their participation in this. And so there's that delicate balance of, you know,
Geoffrey Scott: We want their participation in this. And so there's that delicate balance of, you know, getting the right number to maintain our development margins, getting the right number so our builders can maintain their margins, and getting the right number so our home buyer customers are aggressive and attractive for absorption of those. So that's the line we walk.
Speaker Change: getting the right number to maintain our development margins, getting the right number so our builders can maintain their margins, and getting the right number so our home buyer customers
Mark Harding: So our home buyer customers are aggressive and attractive for absorption of those. So that's the line we walk. We continue to see price increase. And that's, that's just a function of affordability in any market. Denver's no different than any other market. But we look at all three of those as we continue to add additional phases. And does that mean, as some of the other entry-level builders that you see more of a movement in terms of to keep that affordability in your builders towards duplex and role houses, or is there sort of a viewed as being the same mix as you go through the different phases.
Speaker Change: are aggressive and attractive for absorption of those. So that's the line we walk. We continue to see price increase, and that's just a function of affordability in any market. Denver's no different than any other market, but we look at all three of those as we continue to add additional phases.
Mark W. Harding: We continue to see price increases, and that's just a function of affordability in any market. Denver's no different than any other market, but we look at all three of those as we continue to add additional phases. And does that mean, as with some of the other entry-level builders, that you see more of a movement in terms of keeping that affordability and your builders towards duplex and row houses? Or is it sort of viewed as being the same mix as you go through the different phases?
Speaker Change: And does that mean, as some of the other entry-level builders, that you see more of a movement in terms of to keep that affordability in your builders towards duplex and row houses, or is there sort of viewed as being the same mix as you go through the different phases?
Mark Harding: No, I mean, I think that that that that mix, when you throw that mix in there, what it does is it allows them to be in a position and us as a single family renter on there. It allows us to cater to a broad or market of that entry level segment. So you have entry level buyers for, you know, a traditional 2,400 square foot detached house. And maybe that is in the in the low to mid fives. And then if you've got a 40-foot house and that may be at 2000 square feet, they have a different price point.
Geoffrey Scott: No, I mean, I think that that mix when you throw that mix in there, what it does is it allows them to be in a position, and us as a single family renter on there, it allows us to cater to a broader market of that entry-level segment. So you have entry-level buyers for, you know, a traditional 2400 square foot detached house, and maybe that is in the low to mid fives.
Speaker Change: No, I mean, I think that that mix, when you throw that mix in there, what it does is it allows them to be in a position, and us, as a single-family renter on there, it allows us to cater to a broader market of that entry-level segment. So you have entry-level buyers for...
Speaker Change: you know, a traditional 2,400-square-foot detached house, and maybe that...
Geoffrey Scott: And then if you've got a 40 foot house, and that may be at 2000 square feet, they have a different price point. If you've got a duplex, that's a different price point. If you've got a townhome, that's a different price point.
Speaker Change: is in the in the low to mid fives and then if you've got
Speaker Change: a 40-foot house, and that may be at 2,000 square feet, they have a different price point. If you've got a duplex, that's a different price point. If you've got a townhome, that's a different price point. They're all entry-level, but they're really trying to flex into
Mark Harding: If you've got a duplex at the different price point, if you've got a townhome, that's a different price point. They're all entry level, but they're really trying to flex into having. Once somebody comes out here, they love it, they see, you know, the community and what we built and the, you know, the attractiveness of a charter school and all those elements that we really have built into it. And you want to make sure that you have a variety of products that are available for all those types.
Mark W. Harding: They're all entry level, but they're really trying to flex into having once somebody comes out here, they love it, they see, you know, the community and what we've built and, and, you know, the attractiveness of a charter school and all those elements that we really have built into it. And you want to make sure that you have a variety of products that are available for all those types. And is there any change or anticipated change in the mix of the builders that you're using?
Speaker Change: having, once somebody comes out here, they love it, they see, you know, the community and what we've built and the attractiveness of a charter school and all those elements that we really have built into it, and you want to make sure that you have a variety of products that are available for all those types.
Mark Harding: And is there any change or anticipated change in the mix of the builders that you're using? Singh? You know, we continue to add builders. There's, you know, the thing that is really flattering is there almost isn't a week that goes by that I don't get revisited by a builder who's not here, who wants to be here. You know, we have four or five builders that are in this portfolio, and as we move from phase two to phase three, we may look to increase the capacity of that. Now that we're very well established, we have a very large and developed network of transportation. Instead of building 200 lots a year, growing to 400 lots a year, we may be looking at 600 lots a year, and we may have six to eight builders in that portfolio.
Speaker Change: And is there any change or anticipated change in the mix of the builders that you're using?
Geoffrey Scott: Um, you know, we continue to add, um, builders. There's, You know, the thing that is really flattering is there almost isn't a week that goes by that I don't get revisited by a builder who's not here, who wants to be here. You know, we have four or five builders that are in this portfolio, and as we move from phase two to phase three, we may look to increase the capacity of that developed network of transportation.
Speaker Change: You know, we continue to add builders.
Speaker Change: you know, the...
Speaker Change: The thing that is really flattering is there almost isn't a week that goes by that I don't get revisited by a builder who's not here, who wants to be here. You know, we have
Speaker Change: We have four or five builders that are in this portfolio, and as we move from phase two to phase three, we may look to increase the capacity of that. Now that we're very well established, we have a very large and
Geoffrey Scott: Instead of building 200 lots a year, growing to 400 lots a year, we may be looking at 600 lots a year, and we may have six, eight builders in that portfolio. And so, yes, we'll continue to add to that portfolio, and we'll continue to accelerate just because of the maturity of the project and as you add the single-family rent. Have you been and are you continuing to do all the management of those single-family rentals in-house, and do you view that as a sort of another division of the company, or are you outsourcing that, or do you plan to outsource that?
Speaker Change: and developed network of transportation. Instead of building 200 lots a year, growing to 400 lots a year, we may be looking at 600 lots a year and we may have.
Mark Harding: And so, yes, we'll continue to add to that portfolio, and we'll continue to accelerate just because of the maturity of the project.
Speaker Change: six, eight builders in that portfolio. And so yes, we'll continue to add to that portfolio and we'll continue to accelerate just because of the maturity of the project.
Mark Harding: And as you add the single-family rentals, have you been and now you continue to do all the management of those single-family rentals in-house and do you view that as a sort of sort of another division of the company or are you outsourcing that or do you plan to outsource that the management? It is 100% on in-house, both the leasing as well as the maintenance side. Fortunately, we don't have much maintenance because they're brand new homes, but the leasing side, you know, we do have a separate website that we direct folks to through the Affiliate Residential Network here, and it shows each of the model homes that we have available.
Speaker Change: and as you add the single-family rentals
Speaker Change: Have you been and are you continuing to do all the management of those single family rentals in-house and do you view that as a sort of another division of the company or are you outsourcing that or do you plan to outsource that?
Geoffrey Scott: It is 100% done in-house, both the leasing as well as the maintenance side. Fortunately, we don't have much maintenance because they're brand-new homes, but on the leasing side, we do have a separate website that we direct folks to through the affiliate residential network here, and it shows each of the model homes that we have available.
Speaker Change: It is. It is.
Speaker Change: It is 100% done in-house, both the leasing as well as the maintenance side. Fortunately, we don't have much maintenance because they're brand new homes. But the leasing side, we do have a separate website that we direct folks to through the affiliate residential network here, and it shows each of the model homes that we have available. It shows each of the model homes that are coming online, forecast dates for that sort of stuff, and really have had very high success of renewal rates.
Mark W. Harding: It shows each of the model homes that are coming online, forecast dates for that sort of stuff, and really has had very high success with renewal rates. We continue to be attractive, and that's another one in terms of pricing. We want to make sure that we're pricing our rentals in there at such a rate that it gives us a good return on the investment but also gives an affordability index for the people that are renting, such that we have multiple-year tenants on that.
Mark Harding: It shows each of the model homes that are coming online, forecast dates for that sort of stuff, and really have had very high success of renewal rates. So, you know, we continue to be attractive, and that's another one in terms of pricing, right? We want to make sure that we're pricing our rentals in there at such a rate that it gives us a good return on the investment but also gives an affordability index for the people that are renting, such that we have multiple year tenants on that. And each of our rental structures are structured as a one-year lease so that we can make sure that, you know, the tenant is right for us, we're right for the tenant, and we make, you know, market adjustments as appropriate.
Speaker Change: We continue to be attractive, and that's another one in terms of pricing, right? We want to make sure that we're pricing our rentals in there at such a rate that it gives us a good return on the investment.
Speaker Change: but also gives an affordability index for the people that are renting such that we have multiple year tenants on that.
Mark W. Harding: Each of our rental structures is structured as a one-year lease so that we can make sure that the tenant is right for us, we're right for the tenant, and we make market adjustments as appropriate. Any thoughts on making any of those leases rent-to-own in terms of turning over that rental inventory?
Speaker Change: And each of our rental structures are structured as a one-year lease so that we can make sure that the tenant is right for us, we're right for the tenant, and we make market adjustments as appropriate.
Mark Harding: Any thoughts on making any of those leases rent-to-own in terms of turning over that rental inventory? You know, that's something that would be; we do evaluate that. You know, I think what we look for is that we want to continue to build that portfolio, and if we have a liquidity event where we would need, you know, an acquisition or something like that, then we can carve up a group of those and maybe roll those out to another institutional player. Depends on the liquidity needs and the cash needs. You know, as it continues to generate, you know, double-digit returns for us both in terms of cash flow as well as the appreciation of the homes.
Speaker Change: Any thought on making any of those leases rent-to-own in terms of turning over that rental inventory?
Mark W. Harding: Um, you know, that's something that would be, uh, we do evaluate that. Uh, you know, I think what we look for is that we want to continue to build that portfolio. And, and if we have a liquidity event where we would need, you know, an acquisition or something like that, then we can carve up a group of those and maybe, maybe roll those out to another, uh, another institutional player, depending on the liquidity needs and the cash needs.
Speaker Change: You know, that's something that would be, we do evaluate that. You know, I think what we look for is that we wanna continue to build that portfolio and if we have a liquidity event where we would need, you know, an acquisition or something like that, then we can carve up a group of those and maybe roll those out to another institutional player.
Mark W. Harding: As it continues to generate double-digit returns for us, both in terms of cash flow as well as the appreciation of the homes, we like to keep those on the portfolio. But there is always opportunities and very liquid market to spin them off either individually or as a portfolio. That's exactly what I was thinking in terms of if there was a bump in your cash flow needs, Ed, and then you would capture the appreciation at one time as through a gradual increase in the rent, because because one of the questions that's been asked on previous calls and that that you implicitly put into your presentation but didn't expand on it as saying you're you now view a real leg of your company is land development and and with return with regard to cash needs and things like that is there is is there any reasonable possibility given how tight the Denver market and the environments are, you would be able to find another project, with similar opportunities to King Ranch and expand beyond being a King Ranch land developer.
Speaker Change: It depends on the liquidity needs and the cash needs, as it continues to generate double digit returns for us, both in terms of cash flow as well as the appreciation of the homes, we like to keep those.
Mark Harding: We like to keep those on the portfolio but, you know, there is, there is always opportunities and a very liquid market to spin them off either individually or as a portfolio.
Speaker Change: on the portfolio, but there is always opportunities and a very liquid market to spin them off either individually or as a portfolio.
Mark Harding: You know, that's exactly what I was thinking in terms of if there was a bump on your cash flow needs and then you would capture the appreciation at one time as through a gradually increasing the St because one of the questions that's been asked on previous calls and that that you implicitly put into your presentation, but didn't expand on it as saying you now view a real leg of your company's land development. And with return, with regard to cash needs and things like that, is there is there any reasonable possibility given how tight the Denver market and the environment is either you would you would be able to find another project was with a similar opportunity to King Ranch and expand beyond being a King Ranch and developer?
Speaker Change: Yeah, well, that's exactly what I was thinking in terms of if there was a bump in your cash flow needs, and then you would capture the appreciation at one time as through a gradual increase in the rental stream. Yep. Because one of the questions...
Speaker Change: that's been asked on previous calls and that you implicitly put into your presentation but didn't expand on it as saying you now view a real leg of your company as land development.
Speaker Change: and with regard to cash needs and things like that, is there any reasonable possibility given how tight the Denver market and the environments are that you would?
Speaker Change: You would be able to find another project with similar opportunities to King Ranch and expand beyond being a King Ranch land developer.
Mark Harding: Yeah, you bet. I mean, we're, you know, I didn't highlight that, but you know, we are very aggressive about being in the market for additional acquisitions. You know, I will say we've been very disciplined about it and you know, we haven't, we haven't lost an opportunity, but by the same token we also haven't acquired an opportunity. And so the same conversations that we have with the, you know, our strategic marketplace on where we want to acquire more land and more water. You know, the priorities are probably more towards land and water, but, you know, we still are very much in the forefront of making those investments and keeping some dry powder to be able to do that, and our liquidity does provide us an excellent opportunity to sit down at the table and take advantage of that.
Geoffrey Scott: Yeah, you bet. You bet. I mean, we're, you know, I didn't highlight that.
Speaker Change: Yeah, you bet, you bet. I mean, we're, you know, I didn't highlight that, but, you know, we are very aggressive about being in the market for additional acquisitions.
Mark W. Harding: But, you know, we are very aggressive about being in the market for additional acquisitions. I will say we've been very disciplined about it, and we haven't lost an opportunity, but by the same token, we also haven't acquired an opportunity. And so the same conversations that we have with our strategic marketplace on where we want to acquire more land and more water, the priorities are probably more for land than water, but we still are, you know, very much in the forefront of making those investments and keeping some dry powder to be able to do that.
Speaker Change: I will say we've been very disciplined about it.
Speaker Change: We haven't lost an opportunity, but by the same token, we also haven't acquired an opportunity. And so the same conversations that we have with the...
Speaker Change: you know, our strategic marketplace on where we want to acquire more land and more water, you know, the priorities are probably more towards land than water, but, you know, we still are
Speaker Change: very much in the forefront of making those investments and keeping some dry powder to be able to do that. And our liquidity does provide us an excellent opportunity to sit down at the table and...
Mark W. Harding: And our liquidity does provide us with an excellent opportunity to sit down at the table and take advantage of that. Well, well, as I think you've pointed out in the past, if I understood your comments correctly, that your water division perhaps gives you a synergistic, synergistic, advantage over other land or, That's right, absolutely right.
Mark Harding: Well, as I think you pointed out in the past, if I understood your comments correctly, that your water division perhaps gives you a synergistic, synergistic, you know, advantage over the land acquired. Absolutely right.
Speaker Change: Take advantage of that.
Speaker Change: Well, as I think you've pointed out in the past, if I understood your comments correctly, that your water division perhaps gives you a synergistic, you know, advantage over other land requirements. That's right, absolutely right.
Tucker Anderson: Okay, just like my final comment would be on what you said, the frustration with, you know, what appears to those of us who have been around for a long time, a significant undervaluation of the stock. But on the other hand, you've done very well for me, and I thank you. That sort of, sort of, I think I always hope that you keep in mind. And, you know, what you seem to be doing, war and buffets of admonition that in the short term, the markets of voting machine into the long term, it's a weighing machine that it'll figure out what what your company is worth.
Geoffrey Scott: Okay, just my final comment would be on what you said, the frustration with, you know, what appears to those of us who have been around for a long time, a significant undervaluation of the stock. But on the other hand, you've done very well for being like, thank you. That sort of, sort of, I think, I always hope that you keep in mind Warren Buffett's admonition that, in the short term, the market's a voting machine; in the long term, it's a weighing machine, and it'll figure out what your company is worth. And I just, I just, I just hope that the long run isn't so far away, because in the long run, we're all dead.
Speaker Change: Okay, just my final comment would be on what you said, the frustration with, you know, what appears to those of us who have been around for a long time, a significant undervaluation of the stock. But on the other hand, you've done very well for BNI. Thank you.
Speaker Change: that sort of, sort of, I think, I always...
Speaker Change: I hope that you keep in mind.
Speaker Change: You know, what you seem to be doing, Warren Buffett's admonition that in the short term...
Speaker Change: The market's a voting machine, and in the long term, it's a weighing machine. It'll figure out what your company is worth.
Tucker Anderson: And I just, I just, I just hope that long run isn't so far away because it says long run work, where all data should know. But in that regard, are you just going to continue along the current path of adding, adding value.
Kit: And I just hope that long run isn't so far away, because as Kit says, in the long run, we're all dead, as you know. But in that regard...
Mark W. Harding: But in that regard, are you just going to continue along the current path of adding value? And if the market doesn't recognize the value, and you have liquidity gradually shrinking the share base, as you point out, you have a very, Are there other discussions underway about how you might make the market more aware of the value? You bet. And, you know, we'll evaluate that. Every quarter, we evaluate that every month, you know, we take a look at our strategies for that, our IR outreach, our, you know, my conference participation and getting out.
Speaker Change: Are you just going to continue along the current path?
Mark Harding: And if the market doesn't recognize the value and you have liquidity gradually shrinking the share basis, you point out you have a, have a very talented forward or there are other discussions underway about how you might make a market more aware of the value you're creating. You bet. And, you know, we evaluate that every quarter; we evaluate that every month. You know, we take a look at our strategies on that, our outreach, our, you know, my conference participation and getting out. Excuse me, getting out talking to folks that would be new to the company, taking a look at our industry peers and leveraging holders of our industry peers, taking a look at, you know, investor days, taking a look at non-deal road shows and all aspects of that.
Speaker Change: of adding value.
Speaker Change: And if the market doesn't recognize the value and you have liquidity gradually shrinking the share base, as you point out, you have a have a very talented board. Are there other discussions underway about how you might?
Speaker Change: Make the market more aware of the value you're creating.
Speaker Change: You bet. And, you know, we evaluate that.
Speaker Change: Every quarter we evaluate that every month, you know, we take a look at our strategies on that, our IR outreach, our, you know, my conference participation and getting out.
Mark W. Harding: Oh, excuse me, getting out talking to folks that would be new to the company, taking a look at our industry peers and leveraging holders of our industry peers, taking a look at, you know, investor days, taking a look at non-deal roadshows and all aspects of that.
Speaker Change: Oh, excuse me.
Speaker Change: getting out talking to folks that would be new to the company, taking a look at our industry peers and leveraging holders of our industry peers.
Speaker Change: taking a look at, you know, investor days, taking a look at non-deal roadshows, and all aspects of that, and, you know, I guess...
Mark W. Harding: And, you know, I guess it has a great opportunity because we don't need capital and folks can understand that, you know, an investment in here continues to add value, and the company has the ability to continue to shrink the denominator on that. And we're going to continue to do that. You know, there's always calls for being more aggressive on that.
Mark Harding: And, you know, I guess it has great opportunity, you know, because we don't need capital and folks can understand that, you know, an investment in here continues to add value and the company has the ability to continue to shrink the denominator on that, and we're going to continue to do that. You know, there's always calls for being more aggressive on that, and I hear those loud and clear. We continue to try and do that. We're not going to make the market in the stock, but at the end of the day, we are going to continue to add value and returns to the shareholders by doing that.
Speaker Change: It has great opportunity, you know, because we don't need capital and folks can understand that.
Speaker Change: You know, an investment in here continues to add value, and the company has the ability to continue to shrink the denominator on that, and we're going to continue to do that.
Mark W. Harding: And I hear those loud and clear. We continue to try and do that. We're not going to make the market in the stock, but at the end of the day, we are going to continue to add value and returns to the shareholders by doing that. Again, it's a longer tail on that.
Speaker Change: You know, there's always calls for being more aggressive on that, and I hear those loud and clear. We continue to try and do that. We're not going to make the market in the stock, but at the end of the day, we are going to continue to add value and returns.
Mark Harding: And again, it's a longer tail on that we continue to look at. The dividend policy and the timing of declaring dividends, and we will be looking at that, and we continue to look at that, and that's still on the agenda. We'd like it to be a little bit closer closely aligned to making sure that what we're doing on the dividend side is at a point where our annual revenues exceed our annual overhead, and so that allows us some free flexibility on that, and we're getting very close to doing that. So we'll be all of the above approach, and I think you're right.
Speaker Change: to the shareholders by doing that. Again, it's a longer tail on that. We continue to look at...
Mark W. Harding: We continue to look at the Dividend Policy and the Timing of Declaring Dividends, and we will be looking at that. We continue to look at that, and that's still on the agenda. We'd like it to be a little bit closer, closely aligned to making sure that what we're doing on the dividend side is at a point where we're, where our annual revenues exceed our annual overhead. And so that allows us some free flexibility on that.
Speaker Change: The dividend policy and the timing of declaring dividends and we will be looking at that we continue to look at that and that's still on the agenda we'd like it to be a little bit closer closely aligned to
Speaker Change: Making sure that what we're doing on the dividend side is at a point where we're
Speaker Change: where our annual revenues exceed our...
Mark W. Harding: And we're getting very close to doing that, so we'll be using all of the above approaches. And I think you're right that that weighing metric will come into people as we continue to put up good results. Thanks. I'm sorry to monopolize so much of your time, but thanks for everything you've done, and I think continuing to provide additional detail is one of the things that's going to help the evaluation. So, good luck. Thank you, Doug. Mark, how are you?
Speaker Change: annual overhead and so that allows us some free flexibility on that and we're getting very close to doing that. So we'll be all of the above approach and I think you're right that that weighing metric will come into people as we continue to put up good results.
Tucker Anderson: That that weighing metric will come into people as we continue to put up good results. Thanks.
Tucker Anderson: I'm sorry to monopolize so much of your time, but thanks for everything you've done, and I think continued to provide additional detail is one of the things that's going to help the valuation. So, so good luck. Thank you, Tucker.
Speaker Change: Thanks, I'm sorry to monopolize so much of your time, but thanks for everything you've done. And I think continuing to provide additional detail is one of the things that's gonna help the valuation. So good luck. Thank you, Tucker.
Jeffrey Scott: Your next question for today is from Jeffrey Scott with Scott Asset Management.
Speaker Change: Your next question for today is from Geoffrey Scott with Scott Asset Management.
Jeffrey Scott: Mark, how are you? Jeff, I'm great. Thanks. That's my favorite. Every time I drive by, it keeps getting bigger and better. So congratulations.
Mark W. Harding: Geoff, I'm great, thanks. How's my favorite Telluride resident? Yeah, every time I drive by, it keeps getting bigger and better. So congratulations. A couple of quick questions. On the commercial side, you said you were still a bit early. Is it going to be a 2025 event when we see activity, or 2026? I would push it probably to 26.
Jeff: Mark, how are you? Geoff, I'm great, thanks. How's my favorite ride, Resident? Yeah, every time I drive by, it keeps getting bigger and better, so congratulations.
Mark Harding: A couple of quick questions on the commercial side. You said you were still a bit early. Is it going to be a 2025 event when we see activity, or 2026? I would push probably to 26. You know, we have we have some small retail commercial that would be, you know, a convenience store or convenience store, but when you take a look at really the major commercial up by the interstate that's still, that's still, you know, a year plus out to 2026 activity.
Geoffrey Scott: A couple quick questions. On the commercial side, you said you were still a bit early. Is it going to be a 2025 event when we see activity or 2026?
Geoffrey Scott: You know, we have some small retail commercials that would be, you know, a C store or convenience store. But when you take a look at really the major commercials up by the interstate, That's still, you know, a year plus, to 2026 Act, I would say. [inaudible] The price of a home is a function of the land cost, the water tap cost, the building cost, and some profit margin. It seems like the tap fees have been fairly flat. Is that a fair characterization?
Mark W. Harding: I would push probably to 26. You know we have we have some small retail commercial that would be you know convene a C-store or convenience store but when you take a look at really the major commercial up by the interstate
Mark W. Harding: That's still, you know, a year plus out.
Mark Harding: I would say the price of a home is a function of the land cost, the water tap costs, the building cost, and some profit margin. It seems like the tap fees have been fairly flat. Is that, is that a fair characterization? No. Have your tap fees have gone up in the last 12 months? They have; they have significantly. And so you take a look at it. You know, I would say our, and it's a couple, it's by a couple of ways. You know, when we, when we started Sky Ranch, our average tap water tap fee was around 26,000.
Mark W. Harding: to 2026 activity.
Mark W. Harding: Okay.
Mark W. Harding: The
Speaker Change: The price of a home is a function of the land cost, the water tap cost, the building cost, and some profit margin. It seems like the tap fees have been fairly flat. Is that a fair characterization?
Geoffrey Scott: No. Have your cap fees gone up in the last 12 months? They have, they have.
Mark W. Harding: No.
Speaker Change: Your cap fees have gone up in the last 12 months? They have. They have. Significantly.
Mark W. Harding: Significant. And so you take a look at it, you know, I would say it's significant in a couple of ways. You know, when we started Sky Ranch, our average tap water tap fee was around twenty six thousand. And I think that was combined. Combined. Yeah, it was combined water and wastewater.
Speaker Change: And so you take a look at it, you know, I would say our, and it's a couple, it's by a couple of ways.
Speaker Change: When we started Sky Ranch, our average water tap fee was around $26,000, and I think our average... That was combined?
Mark Harding: And I think that was combined. Yeah, it was combined. Water and wastewater. Right. Okay. And I think we've got, we've got a rate, a rate evaluation this month for our water tap fees that will take that up close to 30, so 30, is that 34 for water and sewer? I think that's a water. Yeah, so I think it's going to take it closer to about 38,000. Combine. Yes. Okay.
Speaker Change: combined. Yeah, it was combined. Water and wastewater. Water and wastewater, right.
Geoffrey Scott: Right. Okay. And I think we've got a rate, a rate evaluation this month for our water tap fees, and we'll take that up close, close to thirty. So 30, is that 34 for water and sewer? I think that's the water.
Speaker Change: Okay. And I think we've got a rate evaluation this month for our water taffies that will take that up close to 30...
Speaker Change: So 30, is that 34 for water and sewer?
Mark W. Harding: Yeah, so I think it's going to take it closer to about 38,000 combined. OK. What about the selling price of love? The selling price of lots continues. Lots are different, but they are different because of the different front footages and the categories.
Speaker Change: I think that's the water.
Speaker Change: Yeah, so I think it's going to take it closer to about 38,000.
Speaker Change: combined. Yes.
Mark Harding: What about the selling price of loss? Telling price of lots of lots of lots of different. But they are the different because the different front footages and the categories, but we're continuing to see about a 10 or 12% increase in each of the phases that we have coming online. So we started out with selling lots, and we knew that we needed to be aggressive because we were establishing ourselves both in terms of the market and as well as a developer. And so I would say the loss that we sold in our first phase of 75,000 is now closer to 120,000.
Speaker Change: Okay.
Speaker Change: What about the selling price of loss?
Speaker Change: [inaudible]
Speaker Change: Lots are all different. They are, they're different because of the different front footages and the categories, but we're continuing to see about a 10 or 12 percent increase in each of the each of the phases that we have coming online.
Geoffrey Scott: But we're continuing to see about a 10 or 12 percent increase in each of the phases that we have coming online. So we started out, we started out by selling lots, and we knew that we needed to be aggressive because we were establishing ourselves both in terms of the market as well as as a developer. And so I would say the lots that we sold in our first phase of seventy five thousand are now closer to one hundred and twenty thousand. Okay, so they have continued to creep up nicely.
Speaker Change: So we started out, we started out with selling lots, and we knew that we needed to be aggressive because we were establishing ourselves both in terms of the market as well as a developer.
Speaker Change: And so I would say the lots that we sold in our first phase at $75,000 are now closer to $120,000.
Mark Harding: Okay. So they have continued to creep up nicely. Yeah. And keep in mind, you know, we're balancing that as I tried to detail earlier. You know, we're partnering, balancing our margins, you know, making sure that our home builders are making money on this that are commiserate with their margins and making sure that our home buyers are very extremely, that the price of the home adds to the velocity of the home. So we want to make sure that that velocity, because, you know, that that overall IRR is the important component of this. Very true.
Mark W. Harding: Yeah. And keep in mind, you know; we're balancing that. As I tried to detail earlier, you know, we're partnering, balancing our margins, making sure that our home builders are making money on this that is commensurate with their margins, and making sure that our home buyers are very, that the price of the home adds to the velocity of the home. So we want to make sure that that velocity because, you know, that overall IRR is an important component of it. Very true. Okay. Thanks very much. I appreciate it.
Speaker Change: Okay, so they have continued to creep up nicely.
Speaker Change: Yeah, and keep in mind, you know, we're balancing that as I tried to detail earlier, you know, we're partnering, balancing.
Speaker Change: Our margins, you know, making sure that our homebuilders are making money on this, that are commiserate with their margins, and making sure that our homebuyers are...
Speaker Change: very that the price of the home adds to the velocity of the home so we want to make sure that that velocity because you know that that that overall IRR is the important component of this
Operator: Okay. Thanks very much. Appreciate it. You bet. Once again, if you have any questions, please press star one.
Speaker Change: Very true. Okay, thanks very much. Appreciate it. You bet.
Geoffrey Scott: You bet. Once again, if you have any questions, please press star 1. Your next question is from Greg Vennett of Privacy. Good morning.
Speaker Change: Once again, if you have any questions please press star 1.
Greg Bennett: Your next question is from Greg Bennett, a private investor. Good morning. Thanks for the presentation. You bet. The school. Did we pay for the school, or do we get reimbursed for the school? How does that work? Great question. No, we did not pay for the school. We did dedicate some land. So we donated the land that the school sits on for the building of the school. But we partnered with one of the largest charter school operators in the country, and it's a group out of Michigan called National Heritage Academy. They have over 100 schools nationwide.
Speaker Change: Your next question is from Greg Vennett, a private investor.
Gregory Alexander Roeder: Thanks for the presentation. You bet, the school. Do we pay for the school, or do we get reimbursed for the school? How does that work?
Gregory Alexander Roeder: Good morning. Thanks for the presentation. You bet. The school...
Gregory Alexander Roeder: Did we pay for the school or do we get reimbursed for the school? How does that work?
Mark W. Harding: Great question. No, we did not pay for the school. We dedicated some land, so we donated the land that the school sits on for the building of the school, but we partnered with one of the largest charter school operators in the country. And it's a group out of Michigan called National Heritage Academy. They have over a hundred schools nationwide. They have over 60,000 students. They have a very well-matured, developed curriculum.
Speaker Change: Great question. No, we did not pay for the school. We did dedicate some land, so we donated the land that the school sits on for the building of the school, but we partnered with one of the largest
Speaker Change: charter school operators in the country and it's it's a group out of Michigan called National Heritage Academy they have
Mark Harding: They have over 60,000 students. They have a very well mature developed curriculum. We were actually their first K-12 campus. And they like it so much that they're continuing to do K-12 campuses. Most charters are really focused in that that primary school stage K-8. And we really wanted a full campus, and we wanted one single operator. And so we were thrilled to partner with them. They made the investments into the school. They handle all of the school activities.
Speaker Change: over a hundred schools nationwide. They have over 60,000 students. They have a very well matured, developed curriculum. We were actually their first K-12 campus.
Mark W. Harding: We were actually their first K-12 campus, and they liked it so much that they're continuing to do K-12 campuses. Most charters are really focused on that primary school stage, K-8, and we really wanted a full campus, and we wanted one single operator, and so we were thrilled to partner with them. They made the investments into the school. They handle all of the school activities. I do sit on the chair of the charter school board, and we continue to maintain that interface such that we, you know, we want to demonstrate that value to the charter school, and so... It's a great partnership.
Speaker Change: and they liked it so much that they're continuing to do K-12 campuses. Most charters are really focused in that primary school stage, K-8.
Speaker Change: and we really wanted a full campus and we wanted one single operator and so we were thrilled to partner with them. They made the investments into the school. They handle all of the school activities. I do sit as the chair of
Mark Harding: I do sit as the chair of the charter school board. And we continue to maintain that interface such that we, you know, want to demonstrate that value to the charter school. It's a great partnership. We've been thrilled with the first year of operation, really looking forward to continue to roll that into the high school, which will probably start construction in 2026 for the 2027 school year. So we'll continue to update you with those results. The capacity of the school we have now, the K through 8 or K through 9. I believe you said there's 500 students there now.
Speaker Change: the Charter School Board and we continue to maintain that interface such that we you know we want to demonstrate that value to the Charter School.
Mark W. Harding: We've been thrilled with the first year of operation, really looking forward to, you know, continuing to roll that into the high school, which will probably start construction in 2026 for the 2027 school year, so we'll continue to update you on those results. The capacity of the school we have. K through eight or, and I believe you said there are five there now?
Speaker Change: And so it's a great partnership. We've been thrilled with the first year of operation, really looking forward to, you know, continue to roll that into the high school, which will probably start construction in
Speaker Change: 2026 for 2027 school year. So we'll continue to update you of those results.
Speaker Change: The capacity of the school we have now, the K-8 or K-9, I believe you said there's 500 students there now, is that correct? Right, that's right. Yeah, what's the capacity of the school? It's closer to 850.
Gregory Alexander Roeder: Is that correct? Right? That's right. Yeah, What's the? It's closer to 850.
Mark Harding: Is that correct? Right. That's right. Yeah, what's the capacity of the school? It's closer to it's closer to 850. So you might be at capacity for that school in the next two years. Yes, that's right. That's why that's the planning of then transitioning to the high school. So this is this is a private school or the real estate. This is a public school, but it is a public school. It is a public school. So it's a non-tuition-based school. It's free for the students to attend there, and we have, you know, I say we've got the majority of the students that live in Sky Ranch that are at those grades that we service them.
Mark W. Harding: You might be at capacity for that school in the next two years. Yes, that's right. That's why that's the planning of then transitioning to high school. So this is a private school, or isn't it? The real estate, this is a public school, but it is it is a public school; it is a public school. So it's not a tuition-based school. It's It's free for the students to attend there.
Speaker Change: You might be at capacity for that school.
Speaker Change: in the next two years.
Speaker Change: Yes, that's right, that's the planning of then transitioning to the high school.
Speaker Change: So this is a private school, or is this?
Speaker Change: The real estate tech, this is a public school.
Speaker Change: It is a public school. It is a public school, so it's a non-tuition-based school. It's free for the students to attend there, and we have...
Mark W. Harding: And we have, you know, I'd say we've got the majority of the students that live in Sky Ranch that are at those grades that we serve go to the school. But then we have kids coming from outside the neighborhood coming to the school as well. Okay, so are there plans for another? There are plans for the hike, for another K-Truth. K through 9.
Speaker Change: You know, I'd say we've got the majority of the students that live in Sky Ranch that are at those grades that we service them, go to the school, but then we have kids coming from outside the neighborhood coming to the school as well.
Mark Harding: We go to the school, but then we have kids coming from outside the neighborhood coming to the school as well. So there are plans for another. There's the plans for the high school, but are there plans for another K through K through 9. That's a good question. You know, I don't know, you know, we have we have another site that we can do another K 8 on, and typically what happens is you have, you know, two primary schools that will feed to a high school. So if we did develop the other, and this is really a discussion for I think conjunction with the NHA.
Speaker Change: Okay, so are there plans for another...
Speaker Change: There's the plans for the high school, but are there plans for another K-9?
Mark W. Harding: That's a good question, you know. I don't know. You know, we have another site that we can do another K-8. And typically, what happens is you have, you know, two primary schools that will feed into a high school. If we did develop the other, and this is really a discussion for us in conjunction with NHA, if we developed additional capacity, we'd be serving students beyond the students that live in Sky Ranch. And so we would be picking up students from the surrounding area, surrounding land development areas. And so there's an opportunity to do that, how will we do that?
Speaker Change: I don't know. You know, we have another site that we can do another K8 on.
Speaker Change: and typically what happens is you have, you know, two primary schools that will feed to a high school. If we if we did develop the other, and this is really a discussion for us in conjunction with NHA,
Mark Harding: If we develop additional capacity, we'd be serving students beyond the students that live in Sky Ranch. And so we would be picking up students from the surrounding areas surrounding land development areas, and so there's an opportunity to do that. How we do that, and in conjunction with NHA, you know, we want to make sure that, and, you know, I personally believe, but if I spill over, you know, there's no more valuable investment than to invest into education. And so we that investment in education will continue to make the Sky Ranch community more and more valuable.
Speaker Change: If we developed additional capacity, we'd be serving students beyond the students that live in Sky Ranch.
Speaker Change: And so we would be picking up students from the surrounding areas, surrounding land development areas. And so there's an opportunity to do that, how we do that. And in conjunction with NHA, you know, we want to make sure that.
Gregory Alexander Roeder: And in conjunction with NHA, you know, we want to make sure that and I have a personal belief, but if I spill over, you know, there's no more valuable investment than investing in education. That investment in education will continue to make the Sky Ranch community more and more valuable. So that's a discussion, Greg, that we're having, and a discussion that we're having with NHA, something that we would be willing to make the investment on the land side.
Speaker Change: and, and, and, you know,
Speaker Change: Personal belief, but if I spill over, you know, there's no more valuable investment than to invest into education and so
Speaker Change: We-
Speaker Change: That investment in education will continue to make the Sky Ranch community more and more valuable.
Mark Harding: So that's a discussion, Greg, that we're having, and a discussion that we're having with NHA, something that we would be willing to make the investment on the land side. And they are willing to make as long as their student capacity, as they start to turn away students because they're at capacity. Then that's something that they'd be interested in. Okay, are there any so if you're young. Young family, and you're looking at, and you're in Denver, are there other competitions when it comes to education as fine as the Academy, or do they have other choices if you're your own family?
Speaker Change: That's a discussion, Greg, that we're having and a discussion that we're having with
Gregory Alexander Roeder: And they are willing to make, as long as their student capacity, as they start to turn away students because they're at capacity, then that's something that they'd be interested in. Okay, are there any other comments about education that come as fine as the academy? Or do they have other choices if you're a young family?
Speaker Change: NHA, something that we would be willing to make the investment on the land side, and they are willing to make as long as their student capacity, if they start to turn away students because they're at capacity, then that's something that they'd be interested in.
Speaker Change: Okay, are there any, so if you're a young family and you're looking at, and you're in Denver, are there other competitions when it comes to education as fine as the Academy, or do they have other choices if you're a young family?
Mark W. Harding: Um, so Colorado... Colorado is a choice state, right? So the student can go where he wants to go, and the state funding actually follows the student. So you can go to your local neighborhood school, you can go to a charter school that is not in your neighborhood, you can go to a public school that is not in your neighborhood, and they're all based on capacity. And so if a school starts to run into a capacity issue, then they have a priority of who they serve.
Mark Harding: So Colorado is a choice state, right? So the student can go where it wants to go, and the state funding actually follows the student. So you can go to your local neighborhood school; you can go to a charter school that would not be in your neighborhood; you can go to a public school that's not in your neighborhood, and they're all based on capacity. And so if you start, if a school starts to run into a capacity issue, then they have a priority of who they serve. And so from our standpoint, and this really dives into the detail on schools, but you look at Sky Ranch Academy, our preference is the students that live in Sky Ranch.
Speaker Change: [inaudible]
Speaker Change: Colorado is a choice state.
Speaker Change: Right, so the student can go where it wants to go and the state funding
Speaker Change: actually follows the student. So, you know, you can go to your local neighborhood school, you can go to a charter school that would not be in your neighborhood, you can go to a public school that's not in your neighborhood, and they're all based on capacity.
Speaker Change: And so if you start, if a school starts to run into a capacity issue.
Mark W. Harding: And so from our standpoint, and this really dives into the detail on schools, but you look at Sky Ranch Academy. Our preference is for students that live in Sky Ranch. And once we meet all the needs of the students that live in Sky Ranch, and if we still have capacity, then it's students that live in the district that charters us. Now, the district that charters us is the Bennett School District, so those kids that live in Bennett School District then have the next priority. If there's still capacity, of student availability, and no additional residents in the district, then you can open it up to the neighboring school district, which is in the city of Aurora.
Speaker Change: then they have a priority of who they serve. And so from our standpoint, and this really dives into the detail on schools, but you look at.
Gregory Alexander Roeder: And those students that live in the city of Aurora that's within a geographic priority of Sky Ranch get the next priority, and then the next priority. So it cascades down into both the school district, the local jurisdiction that's building it, and then the proximity of students. Okay, so is it different?
Speaker Change: Sky Ranch Academy. Our preference is the students that live in Sky Ranch.
Mark Harding: And once we meet all the needs of the students that live in Sky Ranch, and if we still have capacity, then it's students to live in the district that charter us. Now the district that charters us is the Bennett School District. So those kids that live in the Bennett School District, then have the next priority. If there's still capacity of student availability, and no additional residents in the district, then you can open it up to the neighboring school district, which is in the city of Aurora. And those students that live in the city of Aurora that's within a geographic priority of Sky Ranch, get the next priority, and then the next priority.
Speaker Change: and once we meet all the needs of the students that live in Sky Ranch and if we still have capacity, then it's students that live in the district that charters us. Now the district that charters us is the Bennett School District, so those kids that live in the Bennett School District then have the next priority. If there's still capacity,
Speaker Change: of
Speaker Change: of Student Availability.
Speaker Change: and no additional residents in the district, then you can open it up to...
Speaker Change: the neighboring school district, which is in the city of Aurora. And those students that live in the city of Aurora, that's within a geographic priority of...
Mark Harding: So it cascades down into both the school district, the local jurisdiction that's building it, and then the proximity of students.
Speaker Change: Sky Ranch, get the next priority, and then the next priority. So it cascades down into both the school district, the local jurisdiction that's building it, and then the proximity of students.
Mark Harding: Okay, so different, different questions. I think none of us are familiar with the Denver marketer. Is there new competition coming in, or is there absorption of your price points that's occurred in other communities where I'm just wondering if you're going to be the choice because there's nothing else available at under $600,000. Or do you know of communities that are coming online that are going to be competitive against Sky Ranch? You know, I would say that given our basis in the land, given our location, given the characteristics of the ground, we probably have a very competitive advantage to continue to compete against any new project that comes out there.
Speaker Change: Okay, so it's a different question.
Mark W. Harding: I think none of us are familiar with the Denver market; is there new competition coming in, or is there absorption? at your price, which has occurred in other communities where... I'm just wondering if you're going to be... the choice because there's nothing of it, nothing else available under $600,000, or are there? are going to be competitive against Sky.
Speaker Change: I think none of us are familiar with the Denver market. Is there new competition coming in or is there absorption at your price points?
Speaker Change: that's occurred in other communities where, I'm just wondering if you're going to be the choice because there's nothing else available under.
Speaker Change: $600,000 or there.
Speaker Change: other.
Speaker Change: Do you know of communities that are coming online that are going to be competitive against Sky Ranch?
Gregory Alexander Roeder: You know, I would say that given our basis in the land, given our location, given the characteristics of the ground, we probably have a very competitive advantage to continue to compete against any new project that comes out there. There are always going to be more projects coming online, but the time lag of getting entitlements and getting through the process is tremendous and costly. And so you have fewer and fewer people that are actually doing what we do just because the market is so frustrating, and every new project takes longer and costs more than it did the last project.
Speaker Change: You know, I would say that, that, you know,
Speaker Change: given our
Speaker Change: Given our basis in the land, given our location, given the characteristics of the ground, we probably have a very competitive advantage to continue to compete against any new project that comes out there.
Mark Harding: They're always going to be more private coming online, but the time lag of getting entitlements and getting through the process is tremendous and costly. So yeah, fewer and fewer people that are actually doing what we do just because the market is so frustrating, and every new project takes longer, costs more than it did the last month. Project. That's not to say that there's not new projects out there, but I do think we have a stronger competitive advantage because of location, because of transportation access, because of how we handled the schools, and because we're developing a damn good product.
Speaker Change: There are always going to be more projects coming online, but the time lag of getting entitlements and getting through the process.
Speaker Change: is tremendous and costly. And so you have fewer and fewer people that are actually doing what we do just because the market is so frustrating and every new project takes longer, costs more than it did the last project.
Mark W. Harding: That's not to say that there are not new projects out there, but I do think we have a stronger competitive advantage because of location, because of transportation access, because of how we handle the schools, and because we're developing a damn good product. So, the entitlements for the property... to the 3,000, or is it per section, phase 2, phase 3? No, it's fully titled. So that frustrating long process you have, a year or three years, whatever. Advantage, I guess.
Speaker Change: That's not to say that there's not new projects out there, but I do think we have a stronger competitive advantage because of location, because of transportation access, because of how we handle the schools, and because we're developing a damn good product.
Mark Harding: Okay, so the entitlements for the property. Is it to the 3,200 homes, or is it per section phase to the phase 3? No, it's fully entitled. So that frustrating long process, you have a two year or three year, whatever advantage, I guess, or I would think so. I would say that's probably accurate. Okay, all right, thank you for taking my questions. Appreciate it. You bet.
Speaker Change: Okay.
Speaker Change #100: So, the entitlements for the property, is it to the 3,200 homes, or is it per section, phase 2, phase 3? No, it's fully entitled.
Speaker Change #101: So that frustrating long process you have a two-year or three-year whatever
Gregory Alexander Roeder: I would think so. I would say that's probably accurate. Okay. All right. Thank you for taking.
Speaker Change #102: Advantage, I guess. I would think so. I would say that's probably accurate.
Mark W. Harding: You bet. Our first question for today is from Elliot. Good morning, Marc.
Speaker Change #103: Okay. All right. Thank you for taking my questions. Appreciate it. You bet.
Elliot Knight: Your next question for today is from Elliot Knight with Knight Advisors.
Speaker Change #104: Your next question for today is from Elliot Knight with Knight Advisors.
Elliot Knight: Good morning, Mark. Elliot, nice to hear from you. Thank you. Just a very quick question. On the slide, Metro Denver Real Estate shortage. There is a bullet point legislative support. Could you explain that? So what we really have is Colorado; they continue to try and push the envelope on housing types of projects. And so what we have here is the occupancy limits. The biggest issue in Colorado for multi-family housing has been product defects legislation and the ability for bright young lawyers to be able to get class action lawsuits against home builders. And so the legislature is really trying to limit that type of loophole, I guess, such that it's not so easy to get a class action suit.
Elliot Knight: Elliot, nice to hear from you. Thank you. I have just one very quick question.
Mark W. Harding: On the slide Metro Denver real estate short, there is a bullet point about legislative support. Could you explain that? So, what we really have is... Colorado. They continue to try and push the envelope on housing types of projects. And so what we have here is that the biggest issue in Colorado for multifamily housing has been product defects legislation and the ability for bright young lawyers to be able to bring class action lawsuits against home builders.
Mark W. Harding: Good morning, Mark. Elliot, nice to hear from you.
Elliot Knight: Thank you. Just a very quick question. On the slide Metro Denver real estate shortage, there is a bullet point legislative support. Could you explain that?
Speaker Change #106: So what we really have is
Speaker Change #107: Colorado, they continue to try and push the envelope on
Speaker Change #107: housing types of projects.
Speaker Change #107: And so what we have here is...
Speaker Change #107: The occupancy limits, the biggest issue in Colorado for multi-family housing has been product defects legislation and the ability for...
Speaker Change #107: bright young lawyers to be able to get class action lawsuits against homebuilders. And so the legislature is really trying to limit that type of
Mark W. Harding: And so the legislature is really trying to limit that type of issue, loophole, I guess, such that it's not so easy to get a class action suit. Clearly, if there's a construction defect, they should be held accountable.
Speaker Change #107: loophole, I guess, such that it's not so easy to get class action suit. Clearly, if there's a construction defect, you know, they should be held accountable, but...
Mark Harding: Clearly, if there's a construction defect, they should be held accountable. But that's not the way it's been working in the past. And so we're seeing a little bit of support for that on how, you know, being more aggressive about town home, getting a smaller footprint, continuing to press the envelope on affordability, because, you know, it is, it is Colorado is experiencing a challenge with affordability. If you say an entry level house is anything less than 500,000, that's still a pretty high number. And the way to reduce that is going to be to have, you know, higher density, higher occupancy.
Mark W. Harding: That's not the way it's been working in the past. And so we're seeing a little bit of support for that on how being more aggressive about townhomes, getting a smaller footprint, continuing to press the envelope on affordability because Colorado is experiencing a challenge with affordability. If you say an entry-level house is anything less than $500,000, that's still a pretty high number.
Speaker Change #107: You know, that's not the way it's been working in the past. And so we're seeing a little bit of support for that on how, you know,
Speaker Change #107: being more aggressive about townhome, getting a smaller footprint, continuing to press the envelope on affordability because Colorado is experiencing a
Speaker Change #107: challenge with affordability. If you say an entry-level house is anything less than $500,000, that's still a pretty high number.
Elliot Knight: And the way to reduce that is going to be to have higher density and higher occupancy. And so that's where we're seeing the Colorado legislature recognize some of these problems. Okay, thank you so much. You bet. Good to hear from you. We have reached the end of the question and answer session, and I will now turn the call over to Mark for closing. So I just want to re-emphasize that we are having our investor day next week. We've got a number of folks that have registered for that. Thank you.
Speaker Change #107: And the way to reduce that is going to be to have higher density, higher occupancy, and so that's where we're seeing the Colorado legislature recognize some of these problems.
Mark Harding: And so that's where we're seeing the Colorado legislature recognize some of these problems. Okay.
Mark Harding: Thank you so much. You bet. Good to hear from you.
Speaker Change #108: Okay. Thank you so much. You bet. Good to hear from you.
Mark Harding: We have reached the end of the question-and-answer session, and I will now turn a call over to Mark for closing remarks. So I do want to just to re-emphasize, we are having our Investor Day next week. We've got a number of folks that have registered for that.
Speaker Change #109: We have reached the end of the question and answer session, and I will now turn the call over to Marc for closing remarks.
Mark W. Harding: So I do want to just re-emphasize, we are having our Investor Day next week. We've got a number of folks that have registered for that. Thank you. Look forward to seeing you out here on next Wednesday.
Mark Harding: Thank you. Look forward to seeing you out here on next Wednesday. We will send out a reminder on the web link, or if all of you want to just jump over into our press release page on the website, that'll give you the link to the Q&A session. So if you can't make it out here for that, you know, it's always helpful to hear how other folks are seeing it. And, you know, it's helpful once somebody comes out and sees the progress that we're making to get to their view of it as well. So don't hesitate to link in on that.
Mark W. Harding: Look forward to seeing you out here next Wednesday. We will send out a reminder of the web link, or if all of you want to just jump over to our press release page on the website, that'll give you the link to the Q&A session. So if you can't make it out here for that, it's always helpful to hear how other folks are seeing it. And it's helpful once somebody comes out and sees the progress that we're making to get their view of it as well.
Speaker Change #110: We will send out a reminder on the web link, or if all of you want to...
Speaker Change #110: just jump over into our press release page on the website. That'll give you a link to the Q&A session. So if you can't make it out here for that, you know, it's always helpful to.
Speaker Change #110: Here how other folks are seeing it and and you know, it's it's helpful once somebody comes out and sees
Mark W. Harding: So don't hesitate to link in on that. And, you know, I'll be hitting various markets, whether that's going to be East Coast, Midwest, or West Coast for a bit more, you know, just investor chats and really trying to get out into the market and meet with investors and meet with new institutions on, just non-deal roadshows and things like that. So as we get those scheduled, I'll shoot that out to y'all and look forward to an opportunity to see you in person. But with that, I will close. And if you're listening to this on a rebroadcast and something piques your interest, don't hesitate to give me a call. This concludes today's conference.
Speaker Change #110: the progress that we're making to get their view of it as well.
Mark Harding: And, you know, I'll be hitting various markets, whether that's going to be East Coast, Midwest, or West Coast for a bit more, you know, just investor chats and really trying to get out into the market. And meet with investors and meet with new institutions on. and just non-deal road shows and things like that. So, as we get those scheduled, I'll shoot that out to y'all and look forward to an opportunity to see you in person.
Speaker Change #110: Don't hesitate to link in on that and, you know, I'll be hitting various markets, whether that's going to be East Coast, Midwest, or West Coast for a bit more
Speaker Change #110: You know, just investor chats and really trying to get out into the market and meet with investors and meet with new institutions on...
Speaker Change #110: just non-deal roadshows and things like that. So as we get those scheduled, I'll shoot that out to y'all and look forward to an opportunity to see you in person. But with that, I will close. And if you're listening to this with a rebroadcast and something piques your interest, don't hesitate to give me a call.
Mark Harding: But with that, I will close, and if you're listening to this with a rebroadcast and something peaks your interest, don't hesitate to give me a call.
Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your time.